NOTES
Introduction
1. Kate O’Keeffe and Josh Beckerman, “Caesar’s CEO Will Step Down,” Wall Street Journal, February 4, 2015, http://on.wsj.com/1BYc5pk.
Chapter 1
1. James L. Heskett, W. Earl Sasser Jr., and Christopher W. L. Hart, Service Breakthroughs: Changing the Rules of the Game (New York: The Free Press, 1990).
2. Some of the earliest work on elements of the customer value equation examined the influence of outcomes (results) and process (quality of customer experience) on perceptions of a service. See, for example, Mary Jo Bitner, Bernard H. Booms, and M. S. Tetrault, “The Service Encounter: Diagnosing Favourable and Unfavourable Incidents,” Journal of Marketing, January 1990, pp. 71–84. This work influenced our conceptualization of the customer value equation in James L. Heskett, W. Earl Sasser Jr., and Leonard A. Schlesinger, The Value Profit Chain: Treat Employees Like Customers and Customers Like Employees (New York: The Free Press, 2002), p. 26.
3. Aruna Divya and Swagato Chatterjee, “The Journey or the Destination: Asymmetric Impact of Process and Outcome on Service Evaluations,” Working Paper No. 478, Indian Institute of Management, accessed February 23, 2015, on papers.ssrn.com.
4. A. Parasuraman, Leonard L. Berry, and Valarie A. Zeithaml, “Understanding Customer Expectations of Service,” Sloan Management Review, Spring 1991, pp. 39–48.
5. For example, see Charles Duhigg, The Power of Habit: Why We Do What We Do in Life and Business (New York: Random House, 2012). For a more extensive discussion of the employee value equation, see Heskett, Sasser Jr., and Schlesinger, The Value Profit Chain, pp. 157–158.
6. For an early compendium of papers on this topic, see John A. Czepiel, Michael R. Soloman, and Carol F. Surprenant, eds., The Service Encounter (Lexington, MA: D. C. Heath, 1985).
7. See James L. Heskett and Roger Hallowell, “Shouldice Hospital Limited (Abridged),” Harvard Business School Case No. 805-002, 2011.
8. John Mackey, in a presentation at a conference on conscious capitalism at Bentley College, May 22, 2012.
9. John Mackey and Raj Sisodia, Conscious Capitalism: Liberating the Heroic Spirit of Business (Boston: Harvard Business Review Press, 2013), p. 90.
10. See, for example, Valarie A. Zeithaml, “How Consumer Evaluation Processes Differ Between Goods and Services,” in Marketing of Services, eds. James H. Donnelly and William R. George (Chicago: American Marketing Association, 1981), pp. 186–190.
11. For examples, see B. Joseph Pine II and James H. Gilmore, The Experience Economy, updated ed. (Boston: Harvard Business School Press, 2011).
12. Experience-creating processes at Mayo Clinic are described in detail in Leonard L. Berry and Kent D. Seltman, Management Lessons from Mayo Clinic: Inside One of the World’s Most Admired Service Organizations (New York: McGraw-Hill, 2008).
13. Jad Mouawad, “The Frills Are Few. The Fees Are Not,” New York Times, June 1, 2013, p. B2.
14. Ibid., p. B2.
15. See Christopher W. L. Hart, James L. Heskett, and W. Earl Sasser Jr., “The Profitable Art of Service Recovery,” Harvard Business Review, July–August, 1990, pp. 148–156.
16. See N. W. Pope, “Mickey Mouse Marketing,” American Banker, July 25, 1979, pp. 4–14; and “More Mickey Mouse Marketing, American Banker, September 12, 1979, pp. 4–14.
17. See, for example, Atul Gawande, “The Cost Conundrum: What a Texas Town Can Teach Us about Health Care,” New Yorker, June 1, 2009, pp. 36–49.
18. Patient Protection and Affordable Care Act, Title III, Section 3021, p. 712. Link to summary of act provisions: http://www.healthcare.gov/law/timeline/full.html.
19. See David H. Maister and Christopher H. Lovelock, “Managing Facilitator Services,” Sloan Management Review, Summer 1982, p. 22; and Roger W. Schmenner, “How Can Service Businesses Survive and Prosper?” Sloan Management Review 27, no. 3 (1986), pp. 21–32.
20. One of the most comprehensive reviews of these efforts is presented by Rohit Verma, “An Empirical Analysis of Management Challenges in Service Factories, Service Shops, Mass Services and Professional Services,” International Journal of Service Industry Management 11, no. 1 (2000), pp. 8–25. In his analysis, Verma uses Schmenner’s 1986 taxonomy.
Chapter 2
1. James L. Heskett, Managing in the Service Economy (Boston: Harvard Business School Press, 1986), pp. 5–43.
2. Sources for this section include the company website, IKEA.com, and the cases Christopher A. Bartlett and Ashish Nanda, “Ingvar Kamprad and IKEA,” Harvard Business School Case No. 390-132, 1996; and Youngme Moon, “IKEA Invades America,” Harvard Business School Case No. 504-094, 2004; as well as other sources cited below.
3. By February 2015, the 88-year-old Kamprad had relinquished the chairmanship of the companies controlling IKEA’s brand and its day-to-day operations.
5. Lauren Collins, “House Perfect: Is the IKEA Ethos Comfy or Creepy?” New Yorker, October 3, 2011, pp. 54–65.
6. Johan Stenebo, The Truth about IKEA: The Secret Success of the World’s Most Popular Furniture Brand (London: Gibson Square, 2010).
7. See Helen Rosethorn, The Employer Brand: Keeping Faith with the Deal (Gower: Farnham, UK, 2009).
8. For evidence of this, see the results of an in-depth study in James L. Heskett, The Culture Cycle: How to Shape the Unseen Force That Transforms Performance (Upper Saddle River, NJ: FT Press, 2012), pp. 151–167.
9. See Tony Hsieh, Delivering Happiness: A Path to Profits, Passion, and Purpose (New York: Business Plus, 2010).
10. Mike McNamee, “Credit Card Revolutionary,” Stanford Business, May 2001, p. 23.
11. For a more extensive discussion of the employee value equation, see Heskett, Sasser Jr., and Schlesinger, The Value Profit Chain, pp. 157–158.
12. Leonard A. Schlesinger, Quality of Work Life and the Supervisor (New York: Praeger, 1982), pp. 1–9.
13. Rogelio Oliva and Robert Kallenberg, “Managing the Transition from Products to Services,” International Journal of Service Industry Management 14, no. 2 (2003), p. 169. Their study was of 11 German capital equipment manufacturers at different stages of developing service offerings for their products.
14. Oliva and Kallenberg, “Managing the Transition,” p. 161.
15. S&P Capital IQ, accessed July 29, 2014, www.capitaliq.com/.
16. “Horsemeat Found in IKEA Meatballs,” USA Today, February 25, 2013, www.usatoday.com/story/news/world/2013/02/25/horsemeat-scandal/1933037.
17. We have had no relationship of any kind with IKEA.
Chapter 3
1. Heskett, Sasser Jr., and Hart, Service Breakthroughs.
2. Organizations that primarily deliver services represented 86.1 percent of best places to work on the Fortune survey from 2009 through 2013. The same is true of the customer service rankings if automobile companies (which actually deliver service through their dealerships) are eliminated from the list. This is not surprising because customer service surveys do not adequately cover business-to-business services that many manufacturers provide.
3. Michael Burchell and Jennifer Robin, The Great Workplace: How to Build It, How to Keep It, and Why It Matters (San Francisco: Jossey-Bass, 2011), p. 13.
4. J. D. Power and Associates, “Achieving Excellence in Customer Service,” Press Release, February 17, 2011.
5. In the spirit of full disclosure, none of us are clients of USAA.
6. One of the early expositions of this idea was presented in Jim Collins and Jerry Porras, Built to Last: Successful Habits of Visionary Companies (New York: HarperBusiness, 1994), especially pp. 43–46.
7. See, for example, Benjamin Schneider and David E. Bowen, “New Services Design, Development, and Implementation and the Employee,” in New Services, W. R. George and C. Marshall, eds., (Chicago: American Marketing Association, 1985), pp. 82–101; and E. M. Johnson and D. T. Seymour, “The Impact of Cross-Selling on the Service Encounter in Retail Banking,” in The Service Encounter, J. A. Czepiel, M. R. Soloman, and C. F. Suprenant, eds., (Lexington, MA: D. C. Heath, 1985), pp. 225–239.
8. For an example of this work, see Frederick F. Reichheld and W. Earl Sasser Jr., “Zero Defections: Quality Comes to Services,” Harvard Business Review, September–October 1990, pp. 105–111.
9. David H. Maister, Practice What You Preach: What Managers Must Do to Create a High Achievement Culture (New York: The Free Press, 2001). This study examined feedback from more than 5,500 respondents from 139 offices operated by 29 firms providing marketing services to clients.
10. This work was first reported in James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser Jr., and Leonard A. Schlesinger, “Putting the Service-Profit Chain to Work,” Harvard Business Review, March–April 1994, pp. 164–174.
11. In figure 3-3 elements connected by dark lines and arrows are those that have withstood the challenge of confirmatory research relatively well. Other relationships shown there have received less attention from managers and academic researchers even though they may be influencing actual managerial practice.
12. See, for example, Benjamin Schneider, P. J. Hanges, D. B. Smith, and A. N. Salvaggio, “Which Come First: Employee Attitudes or Organizational Financial and Market Performance?” Journal of Applied Psychology 88 (2003), pp. 836–851; and J. K. Harter, F. L. Schmidt, and T. L. Hayes, “Business-Unit Level Relationship between Employee Satisfaction, Employee Engagement, and Business Outcomes: A Meta-Analysis,” Journal of Applied Psychology 87 (2002), pp. 268–279.
13. See R. Silvestro and S. Cross, “Applying the Service Profit Chain in a Retail Environment,” International Journal of Service Industry Management 38 (2000), pp. 24–47; R. Silvestro, “Dispelling the Modern Myth: Employee Satisfaction and Loyalty Drive Service Profitability,” International Journal of Operations & Production Management 22, no. 1 (2002), pp. 30–49; and Timothy L. Keiningham, Lerzan Aksoy, Robert M. Daly, Kathy Perrier, and Antoine Solom, “Reexamining the Link between Employee Satisfaction and Store Performance in a Retail Environment,” International Journal of Service Industry Management 17, no. 1 (2006), pp. 51–57.
14. David H. Maister, Practice What You Preach, p. 154.
15. See, for example, Fred Reichheld, The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value (Boston: HBS Press, 1996).
16. Corporate Leadership Council, Driving Employee Performance and Retention Through Engagement: A Quantitative Analysis of the Effectiveness of Employee Engagement Strategies (Corporate Executive Board, 2004), p. xiv.
17. Shad Foos, vice president of Marketing, Service Management Group, e-mail message to authors, February 10, 2015.
18. Bo H. Eriksen, “How Employee Turnover Affects Productivity” (working paper available on Social Science Research Network, ssrn.com, January 16, 2010).
19. Corporate Leadership Council, Driving Employee Performance and Retention.
20. Shad Foos, e-mail message to authors.
21. Ibid.
22. The study is reported in Heskett, The Culture Cycle.
23. Ibid., especially pp. 136–142.
24. Limited Brands, “Service Profit Chain Analysis, 2012” (proprietary internal research, used with permission).
25. Ibid.
26. Anthony J. Rucci, Steven P. Kirn, and Richard T. Quinn, “The Employee-Customer-Profit Chain at Sears,” Harvard Business Review, January–February 1998, pp. 82–97.
27. Maister, Practice What You Preach, especially p. 79.
28. Bloomberg Businessweek, June 23–June 29, 2014, p. S2.
29. Sarah Max, “If Its Customers Love a Business, This Equity Firm Does Too,” New York Times, July 30, 2013, p. B7.
30. Fred Reichheld, The Ultimate Question: Driving Good Profits and True Growth (Boston: HBS Press, 2006).
31. Robert S. Kaplan and David P. Norton, The Balanced Scorecard: Translating Strategy into Action (Boston: HBS Publishing, 1996).
32. Lerzan Aksoy, “How Do You Measure What You Can’t Define?: The Current State of Loyalty Measurement and Management,” Journal of Service Management 24, no. 4 (2013), p. 373.
33. Dan Maher and Dan O’Brien, “So Long, Safe Harbor: Putting the Service Profit Chain to Work,” Case No. OU-184 (New York: Omnicom University, 2013).
34. Adapted from Tom Davenport, “Retail’s Winners Rely on the Service-Profit Chain,” Harvard Business Review, November 2012.
35. Itamar Simonson and Emanuel Rosen, Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information (New York: HarperBusiness, 2014).
Chapter 4
1. John Thornhill, “France’s Favourite Englishman,” Financial Times, February 9–10, 2008, p. 3 (Life & Arts).
2. Mark Cuban, foreword to The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team from Worst to First by Jonah Keri (New York: Ballantine Books, 2011), p. vii.
3. John C. Bogle, Enough: True Measures of Money, Business, and Life (New York: John Wiley & Sons, 2009), p. 115. Bogle was quoting the words of a sermon given in London on the 200th anniversary of Lord Nelson’s death.
4. Ibid., p. xvi.
5. Thomas H. Davenport and Brook Manville tell it well in their book, Judgment Calls: 12 Stories of Big Decisions and the Teams That Got Them Right (Boston: Harvard Business Review Press, 2012), pp. 143–159.
6. This and other information about Mayo Clinic in this chapter can be found in the excellent profile of the organization by Leonard L. Berry and Kent D. Seltman, Management Lessons from Mayo Clinic: Inside One of the World’s Most Admired Service Organizations (New York: McGraw-Hill, 2008), p. 195.
7. See, for example, Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Delivering Quality Service: Balancing Customer Perceptions and Expectations (New York: Free Press, 1990).
8. See Heskett, The Culture Cycle, pp. 135–136.
9. Measured in SMG employee surveys as intent to be working here 6 and 12 months from now.
10. Andy Fromm, Joe Cardador, and Mark Hunter, Latest Findings from the Restaurant and Retail Industries (Kansas City: Service Management Group, 2006).
11. For one of the most comprehensive, see J. Richard Hackman and Greg R. Oldham, Work Redesign (Boston: Addison-Wesley Publishing, 1980).
12. Leonard A. Schlesinger and Jeffrey Zornitsky, “Job Satisfaction, Service Capability, and Customer Satisfaction: An Examination of Linkages and Management Implications,” Human Resource Planning 14, no. 2, pp. 141–149.
13. Fromm, Cardador, and Turner, Latest Findings, pp. 13 and 18.
14. This study, reported in detail in Marcus Buckingham and Curt Coffman, First, Break All the Rules (New York: Simon & Schuster, 1999), was based on in-depth interviews with more than 80,000 managers in more than 400 companies.
15. No-surprises management is usually a term applied to efforts of subordinates to “manage up” by not surprising their superiors. Here we have turned the proposition upside down to reflect the reverse effect.
16. Jean M. Phillips, “Effects of Realistic Job Previews on Multiple Organizational Outcomes: a Meta-analysis,” Academy of Management Journal 41, pp. 673–690.
17. See, for example, Chip Heath and Dan Heath, Decisive: How to Make Better Choices In Life and Work (New York: Crown Business, 2013), pp. 212–213.
18. See, for example, Jack Welch’s account of GE’s effort to disassociate itself from managers unable to manage by the company’s values, in Jack Welch with John A. Byrne, Jack: Straight from the Gut (New York: Warner Business Books, 2001), pp. 188–189.
19. Berry and Seltman, Management Lessons from Mayo Clinic, p. 143.
20. Lululemon.com, accessed January 14, 2013. This and the following quote are from the same source.
21. Amy Wallace, “It’s a Stretch,” New York Times Magazine, February 8, 2015, pp. 20–23.
22. “Dining Out: Good Manners Beget Good Service,” editorial, Boston Globe, August 20, 2012.
23. Ibid.
24. See Julie Weed, “In Turnabout, Some Companies Are Rating Their Customers,” New York Times, December 2, 2014, p. B7.
25. Adam Bryant, “He’s Not Bill Gates, or Fred Astaire,” New York Times, February 14, 2010, p. B2.
26. Jena McGregor, “The Employee Is Always Right,” Businessweek, November 19, 2007, p. 80. See also Vineet Nayar, Employees First, Customers Second: Turning Conventional Management Upside Down (Boston: Harvard Business Press, 2010).
27. See Gunter K. Stahl, Martha L. Maznevski, Andreas Voigt, and Karsten Jonsen, “Unraveling the Effects of Cultural Diversity in Teams: A Meta-Analysis of Research on Multicultural Work Groups,” Journal of International Business Studies 41, no. 4 (2010), pp. 690–709. The authors conclude that in teams, “cultural diversity leads to process losses through task conflict and decreased social integration, but also to process gains through increased creativity and satisfaction.”
28. Amy C. Edmondson, Teaming: How Organizations Learn, Innovate, and Compete in the Knowledge Economy (San Francisco: Jossey-Bass, 2012).
29. See an interview of Richard Hackman with Diane Coutu, “Why Teams Don’t Work,” Harvard Business Review, May 2009, pp. 99–105; and Richard J. Hackman, Leading Teams: Setting the Stage for Great Performance (Boston: Harvard Business School Press, 2002).
30. Giada DiStefano, Francesa Gino, Gary Pisano, and Bradley Staats, “Learning by Thinking: How Reflection Aids Performance,” Harvard Business School Working Paper No. 14–093, March 2014.
31. Kaplan and Norton, The Balanced Scorecard.
32. The quotation was verified by David Glass, April 10, 2002.
33. We first called this the “cycle of failure,” a name that our colleague at the time, the late Christopher Lovelock, suggested we change to “cycle of mediocrity.” We have further modified it to remove the stigma of even that name.
34. See Robert Kanigel, The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency (New York: Viking, 1997).
35. Bonnie Kavoissi, “Costco CEO: Raise the Minimum Wage to More Than $10 per Hour,” Huffington Post, March 6, 2013.
36. Wayne F. Cascio, “Decency Means More Than ‘Always Low Prices’: A Comparison of Costco to Wal-Mart’s Sam’s Club,” Academy of Management Perspectives, August, 2006. See also Cascio, “The High Cost of Low Wages,” Harvard Business Review, December 2006, pp. 23–33.
37. As we completed this book, Walmart announced that it would raise the minimum wage paid to its employees, provide more regular work schedules, offer more opportunities for advancement, and focus on recruiting and retaining “better talent so it can improve its business . . . [with] better-run stores, more satisfied customers and an increase in sales and profits.” Anne D’Innocenzio, “WalMart Is Raising Its Wages,” Sarasota Herald-Tribune, February 20, 2015, pp. D1–D2.
38. Davenport and Manville, Judgment Calls, p. 153.
39. Ibid., p. 157.
40. Huntley Manhertz Jr., “Worldwide Trends in Employee Retention,” AchieveGlobal, http://www.achieveglobal.com/resources/files/Worldwide_Trends_Employee_Retention_Report.pdf, February 2011. This study of 738 managers from several countries found that one in four planned to leave in the coming year.
41. D’Innocenzio, “WalMart Is Raising Its Wages,” p. D2.
Chapter 5
1. David A. Maister, “The Psychology of Waiting Lines,” in The Service Encounter, John A. Czepiel, Michael R. Soloman, and Carol F. Suprenant, eds. (Lexington, MA: D. C. Heath, 1985), pp. 113–123.
2. Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011), especially pp. 380–409.
3. Huggy Rao and Robert Sutton, “Bad to Great: The Path to Scaling Up Excellence,” McKinsey Quarterly, February, 2014, http://www.mckinsey.com/Insights/Organization?Bad_to_great. This excerpt is from a book by the same authors, Scaling Up Excellence: Getting to More without Settling for Less (New York: Crown Business, 2014).
4. John Colapinto, “Check, Please: The Challenge of Creating a World-Class Restaurant—and Turning a Profit,” New Yorker, September 10, 2012, pp. 58–65.
5. Frances Frei and Anne Morriss, Uncommon Service: How to Win by Putting Customers at the Core of Your Business (Boston: Harvard Business Review Press, 2012), pp. 75–76.
6. For a more extensive discussion of service guarantees, see Christopher W. L. Hart, “The Power of Unconditional Service Guarantees,” Harvard Business Review, July–August 1988, pp. 54–62; and Christopher W. L. Hart, Leonard A. Schlesinger, and Dan Maher, “Guarantees Come to Professional Service Firms,” Sloan Management Review, Spring 1992, pp. 19–30.
7. The Hampton Inn example is based on company data and Christopher W. L. Hart, “Hampton Inn’s Guests Satisfied with Satisfaction Guaranteed,” Marketing News, February 4, 1991, p. 7.
8. This vignette is based on Jennifer Steinhauer and Michael S. Schmidt, “Man behind FEMA’s Makeover Built Philosophy on Preparation and Waffle House,” New York Times, November 4, 2012, p. 31.
9. For a detailed description of the Waffle House strategy, see W. Earl Sasser Jr., “Waffle House,” Harvard Business School Case No. 672–101, 1972, revised 1977.
10. Steinhauer and Schmidt, “Man behind FEMA’s Makeover.”
11. See Kaplan and Norton, The Balanced Scorecard.
12. For early work on service gaps, see A. Parasuraman, Valarie A. Zeithaml, and Leonard L. Berry, “A Conceptual Model of Service Quality and Its Implications for Future Research,” Journal of Marketing, Fall 1985, pp. 41–50. The authors concentrate on negative service gaps, but the concept applies similarly to positive gaps.
13. Ibid.; and Christopher Lovelock, Product Plus (New York: McGraw-Hill, 1994).
14. Jim Collins, Good to Great: Why Some Companies Make the Leap . . . and Others Don’t (New York: Harper Collins, 2001), p. 6.
15. The organization that was second on this criterion was another that encountered significant difficulties later, Fannie Mae.
16. Rachel Beck, “Lessons in How Circuit City’s Job Cuts Backfired,” San Francisco Chronicle, January 13, 2008, p. C3.
17. Leonard L. Berry, A. Parasuraman, and Valarie A. Zeithaml, “Improving Service Quality in America: Lessons Learned,” Academy of Management Executive 8, no. 2, 1994, pp. 32–52.
18. A. Parasuraman, Valarie A. Zeithaml, and Leonard Berry, “SERVQUAL: A Multiple-Item Scale for Measuring Consumer Perceptions of Service Quality,” Journal of Retailing, Spring 1988, pp. 12–40.
19. See, for example, Tom R. Tyler, “Leadership and Cooperation in Groups,” American Behavioral Scientist 45, no. 5 (Jan. 2002), 769–782.
20. For an all-too-common discussion of this, see Tracey Meares, “The Legitimacy among Young African-American Men,” the Barrock Lecture on Criminal Law, Marquette University Law School, February 19, 2009, Marquette Law Review, Summer 2009, pp. 651–666.
21. See Jaren Lanier, Who Owns the Future? (New York: Simon & Schuster, 2013).
Chapter 6
1. Leonard L. Berry, A. Parasuraman, and Valarie A. Zeithaml, “Improving Service Quality in America: Lessons Learned,” Academy of Management Executive 8, no. 2 (1994), p. 37.
2. Material regarding Starbucks in this chapter is based on Howard Schultz with Joanne Gordon, Onward: How Starbucks Fought for Its Life without Losing Its Soul (New York: Rodale, 2011).
3. Ibid., p. 4.
4. Alan Levin and Julie Johnsson, “Asiana Crash Probe: Is Autopilot Making Flying Less Safe?” Bloomberg Businessweek, July 18, 2013, http://www.bloomberg.com/ bw/articles/2013–07–18/asiana-crash-probe-is-autopilot-making-flying-less-safe.
5. Michel Anteby, Elena Corsi, and Emilie Billaud, “Automating the Paris Subway (A),” Harvard Business School Case No. 9–413–061, 2012.
6. Michel Anteby, Elena Corsi, and Emilie Billaud, “Automating the Paris Subway (B),” Harvard Business School Case No. 9–413–062, 2012.
7. Catherine Shaw, “Ahead of the Curve,” Financial Times, July 14–15, 2012, p. 1 (House & Home Section).
8. See, for example, B. Bowonder, Mohit Bansal, and A. Sharnitha Giridhar, “A Telemedicine Platform: A Case Study of Apollo Hospitals Telemedicine Project,” International Journal of Service Technology and Management 6, nos. 3/4/5 (2005); and, for a description of the early development of the organization and its culture, Gary Loveman and Jamie O’Connell, “Apollo Hospitals of India (A),” Harvard Business School Case No. 9–396–027, 1996.
9. For a discussion of Internet-based networks, see Thomas R. Eisenmann, ed., Internet Business Models: Text and Cases (New York: McGraw-Hill, 2001); and Thomas R. Eisenmann, “Managing Networked Businesses: Summary Module,” Harvard Business School Module Note 808–008, 2007.
10. See James L. Heskett and W. Earl Sasser Jr., “Southwest Airlines: In a Different World,” Harvard Business School Case 910–419, 2009.
11. Pull networks sometimes involve the same kind of risk. For example, Craigslist, a rapidly growing Internet website, became associated with questionable advertisers that reflected poorly on its credibility and required that the operator of the site begin screening its advertisers for acceptability.
12. Management at McDonald’s continues to struggle with this issue. In mid-2013 it announced that two franchisees in Detroit would discontinue their practice of serving halal beef and chicken products to a predominantly Muslim clientele when they were sued for allegedly selling as halal meats products that were not halal.
13. For an early development of this concept, see Bernard H. Booms and Mary Jo Bitner, “Marketing Strategies and Organization Structures for Service Firms,” in Marketing of Services, J. Donnelly and William R. George, eds. (Chicago: American Marketing Association, 1985), pp. 47–52. Booms and Bitner define a servicescape as “the environment in which the service is assembled and in which the seller and customer interact, combined with tangible commodities that facilitate performance or communication of the service.”
14. Mary Jo Bitner, “Servicescapes: The Impact of Physical Surroundings on Customers and Employees,” Journal of Marketing 56, no. 4 (April 1992), pp. 57–71.
15. See Mark S. Rosenbaum, “The Symbolic Servicescape: Your Kind Is Welcome Here,” Journal of Consumer Behavior 4 (2005), pp. 257–267.
16. Observations here summarize the results of many research projects conducted in restaurants and other service venues. See, for example, Bitner, “Servicescapes”; Mary Jo Bitner, “The Servicescape,” in Handbook of Services Marketing & Management, Teresa A. Swartz and Dawn Iacobucci (New York: Sage Publications, 2000), chapter 2; and Eric Sundstrom and Irwin Altman, “Physical Environments and Work-Group Effectiveness,” Research in Organizational Behavior 11 (1989), pp. 175–209.
17. Howard Schultz, Onward, pp. 121–122.
18. Joan O’C. Hamilton, “Will They Eat Our Lunch?” Stanford Magazine, January–February, 2014, https://alumni.stanford.edu/get/page/magazine/ article/?article_id=67459.
Chapter 7
1. Information concerning Châteauform’ in this chapter is based on personal observation, the company’s website, http://chateauform.com/en/chateauform/maison/29/la-villa-gallarati-scotti, promotional material, and a case by Benoit Leleux, Winter Nie, and Anne-Sarine Courcoux, “Chateauform’ (A): How to Grow and Maintain Service?” Case No. IMD-3-1660, International Institute for Management Development, October 25, 2006.
2. Various studies have shown that customers with a negative perception of a service are significantly more likely to tell others than those with a positive perception.
3. See M. D. Uncles, G. R. Dowling, and K. Hammond, “Customer Loyalty and Customer Loyalty Programs,” Journal of Consumer Marketing 20, no. 4 (2003), pp. 294–316.
4. Ibid.
5. See James L. Heskett, W. Earl Sasser, and Joe Wheeler, The Ownership Quotient: Putting the Service Profit Chain to Work for Unbeatable Competitive Advantage (Boston: Harvard Business Press, 2008).
6. See B. Joseph Pine II and James H. Gilmore, The Experience Economy: Work Is Theatre & Every Business a Stage (Boston: HBS Press, 1999).
7. The research was first described in Heskett, Sasser, and Wheeler, The Ownership Quotient, pp. 17–18.
8. One of us participated in a discussion in the late 1970s at a neighborhood restaurant in Cambridge, Massachusetts, with airline executives who described a set of ideas that would later lead to the introduction of one of the early programs, AAdvantage. Little did we realize at the time how effective frequent-flyer programs would become in building loyalty.
9. Frederick F. Reichheld and W. Earl Sasser Jr., “Zero Defections: Quality Comes to Services,” Harvard Business Review, September–October 1990, pp. 105–111. Reichheld subsequently expanded on these ideas in his book The Loyalty Effect, especially pp. 33–62.
10. See, for example, S. J. Grove and R. P. Fisk, “The Impact of Other Customers on Service Experiences: A Critical Incident Examination of ‘Getting Along,’” Journal of Retailing, Spring 1997, pp. 63–85. Other ways in which customers contribute to the quality of the experience are suggested in C. A. Lengnick-Hal, “Customer Contributions to Quality: A Different View of the Customer-Oriented Firm,” Academy of Management Review, July 1996, pp. 791–824; and David E. Bowen, “Managing Customers as Human Resources in Service Organizations,” Human Resource Management, Fall 1986, pp. 371–383.
11. Dwayne D. Gremler and Stephen W. Brown, “The Loyalty Ripple Effect: Appreciating the Full Value of Customers,” International Journal of Service Industry Management. 10, no. 3 (1999), pp. 271–291.
12. Heskett, Sasser, and Wheeler, The Ownership Quotient, p. 18.
13. Brad Stone, The Everything Store: Jeff Bezos and the Age of Amazon (New York: Little, Brown, 2013), p. 327.
14. See Reichheld, The Ultimate Question; and Timothy L. Keiningham, Bruce Cook, Tor Wallin Andreassen, and Lerzan Aksoy, “A Longitudinal Examination of Net Promoter and Firm Revenue Growth,” Journal of Marketing, July, 2007, pp. 39–51. Reichheld, in his work, maintains that he has found no correlation between growth and customer satisfaction; Keiningham and his colleagues conclude that customer satisfaction is a better measure of growth than the Net Promoter Score.
15. Christopher W. L. Hart, “The Power of Unconditional Service Guarantees,” Harvard Business Review 66 no. 4 (July–August 1988,), pp. 54–62.
16. A more complete version of this story can be found in Heskett, Sasser, and Wheeler, The Ownership Quotient, pp. 184–189.
17. What follows regarding Communispace is based on Michael Winerip, “Experienced Hands, Still Valued,” New York Times, March 7, 2010, p. ST2; and Diane Hessan, conversations with the authors.
18. See, for example, Itamar Simonson and Emanuel Rosen, Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information (New York: HarperBusiness, 2014).
Chapter 8
1. Jennifer Reingold, “Still Crazy after All These Years,” Fortune, January 14, 2013, pp. 95–96.
2. Quoted material is from Brad Stone, “The Secrets of Bezos: How Amazon Became the Everything Store,” Bloomberg Businessweek, October 10, 2013, http://www.bloomberg.com/bw/articles/2013–10–10/jeff-bezos-and-the-age-of-amazon-excerpt-from-the-everything-store-by-brad-stone; see also Stone, The Everything Store.
3. See Daniel H. Pink, Free Agent Nation: The Future of Working for Yourself (New York: Warner Business Books, 2001).
4. See Brad Stone, “Crowdsourcing Your Grocery Bags,” Bloomberg Businessweek, July 15, 2013, pp. 32–33; and Ryan Lawler, “Instacart Could Raise a Big New Round of Funding Valuing It At $400 Million,” techcrunch.com, posted April 17, 2014.
5. Douglas MacMillan, Sam Schechner, and Lisa Fleisher, “Uber Snags $41 Billion Valuation,” Wall Street Journal, December 4, 2014, http://www.wsj.com/articles/ubers-new-funding-values-it-at-over-41-billion-1417715938.
6. See Austin Carr, “Inside Airbnb’s Grand Hotel Plan,” Fast Company, April 2014, http://www.fastcompany.com/3027107/punk-meet-rock-airbnb-brian-chesky-chip-conley.
7. Ibid.
8. Michael Pollock, “Figuring Out Who Is Set to Sell Their Home,” Sarasota Herald-Tribune, April 6, 2015, pp. 1A and 13A.
9. Gary Loveman, quoted in Heskett, Sasser Jr., and Wheeler, The Ownership Quotient, pp. 109–110.
10. Michael Spence, The Next Convergence: The Future of Economic Growth in a Multispeed World (New York: Farrar, Straus and Giroux, 2011).
11. Peter M. Senge, The Fifth Discipline: The Art and Practice of the Learning Organization, rev. ed. (New York: Random House, 2006), p. xviii.
12. Bryant, “He’s Not Bill Gates, or Fred Astaire,” p. B2.
13. See Peter M. Senge, The Fifth Discipline, p. xviii.
14. See Stahl, Maznevski, Voigt, and Jonsen, “Unraveling the Effects of Cultural Diversity in Teams” pp. 690–709.
15. Michael L. Tushman and Charles A. O’Reilly, III, Winning through Innovation: A Practical Guide to Leading Organizational Change and Renewal (Boston: Harvard Business School Press, 1997), p. x.
16. Ben Cheng, Michelle Kan, Gad Levanon, and Rebecca L. Ray, “Job Satisfaction: 2014 Edition,” The Conference Board, June, 2014.
17. Manhertz Jr., “Worldwide Trends in Employee Retention.”
Epilogue
1. Autograph is described in more detail in Francis X. Frei, “Progressive Insurance (A): Pay-As-You-Go Insurance,” Harvard Business School Case No. 602–175, 2008.
2. Teresa Dixon Murray, “Auto Insurers Ramp Up Monitoring Your Driving in Exchange for Cutting Your Rate,” Plain Dealer, May 27, 2012, http://www.cleveland.com/business/index.ssf/2012/05/auto_insurers_ramp_up_monitori.html.
3. Information in this paragraph is based on a report, Progressive Corporation, Linking Driving Behavior to Automobile Accidents and Insurance Rates: An Analysis of Five Billion Miles Driven, Progressive Corporation, 2012.
4. Progressive executive, interview with the authors, March, 2013.
5. “Progressive Firsts,” https://www.progressive.com/progressive-insurance/first/, accessed May 15, 2013.
6. “Core Values,” https://www.progressive.com/progressive-insurance/core-values/, accessed June 2, 2014.
Appendix
1. See, for example, Spence, The Next Convergence.
2. Cheng, Kan, Levanon, and Ray, “Job Satisfaction.”
3. Towers Perrin, Towers Perrin Global Workforce Study (New York: Towers Perrin, 2005).
4. Bruce Einhorn and Sharon Chen, “Singapore Confronts an Emotion Deficit,” Bloomberg Businessweek, November 26–December 2, 2012, pp. 24 and 26.
5. Towers Perrin, Towers Perrin Global Workforce Study.