Richard C. Larson

Services. What do we think of? Taking cash from an ATM machine? Talking on our cell phones? Surfing the web? Watching TV? Picking up our mail? Yes, all these daily activities and much more. In fact, we would be hard-pressed to identify significant parts of our lives that are not service-related. About 150 years ago, over 50% of the US workforce toiled in agriculture. Today, it is about 2%, and we grow a lot more food. Agriculture is not a service, but its workforce has plummeted while the sector has become more productive. In the US post-WWII boom, in the late 1940s, the fraction of the US workforce in manufacturing peaked at about 35%. Today, it is a mere 9%. The percentage of gross domestic product (GDP) associated with manufacturing parallels these numbers, from being about 30% post-WWII to being about 12% today. What has filled the void? Answer: The US service sector. It has swelled to about 80% of the GDP!

What precisely is the service sector? Economists define it by subtraction. The service sector is everything in the economy that is NOT agriculture (including forestry and fishing) OR industry (manufacturing and also mining and construction). That subtraction leaves us with the majority of the world in which we live! In addition to the mundane day-to-day services chores, we have the health care system (about 18% of the economy), education (8–10% of the economy) and much more—government, transportation, entertainment, utilities, etc. The excellence or nonexcellence of services can literally mean the difference between life and death!

We are fortunate that Robin Qiu has written this book at this time. He reports that we in the United States have had a national obsession with manufacturing and our international competitiveness in that domain. Yet, it is services that comprise the largest part of the economy, by far. The service sector creates a net international trade surplus for the United States. Scores of books have been written about manufacturing, which is now 12% of the GDP. Far fewer books have been written about services, which constitutes 80% of the GDP. Robin has been a leader in pushing us, not to ignore manufacturing, but to move it upward to its rightful place focusing on the services sector. He is the principle founder of the new INFORMS journal, Service Science. This book represents another major contribution to service sector analysis.

At my home institution, the Massachusetts Institute of Technology, the graduate Masters program “Leaders for Manufacturing,” founded in 1988, has recently been renamed “Leaders for Global Operations,” reflecting the fact that many of today's industrial leaders are in services such as retailing and supply chain management and not manufacturing.

Robin says that a service is provided as part of a complex sociotechnical system. This broad nontechnocratic view is perfect from my point of view. Services cannot be meaningfully studied solely through sharply focused discipline-based glasses. To be effective, service sector analyses cannot be Tayloristic “time and motion” studies. We require an interdisciplinary approach, where aspects of the social sciences often dominate traditional narrow engineering-measurable quantities.

My favorite early example of this is the story of queueing at elevators in the 1950s in New York City. With the post-WWII economic growth, more high rise buildings were constructed in Manhattan—as office buildings, hotels, and apartments. People started to complain about delays for elevators in these buildings, especially at morning and late afternoon rush hours. A narrow engineering-focused queueing analysis might have concluded that some of these buildings should be destroyed and designed over, with more elevator shafts, as the current designs could not support peak load traffic. (I say this only slightly tongue in cheek!) But a colleague of Professor Russell Ackoff of the University of Pennsylvania was dispatched to study the situation. He indeed verified the numerous customer complaints about elevator delays. Then, in a moment of true creative thinking, he redefined the problem. He thought to himself, “What if the problem is not the magnitude of the delays waiting for the next elevator? What if the problem is the complaints about those delays?” He postulated that the elevator customers needed a distraction while they were waiting. So, in a spurt of lateral thinking, he purchased and had installed floor-to-ceiling mirrors adjacent to all the elevators in a test building. Guess what? The complaints about elevator delays plummeted to near zero, while the statistics of delay remained unchanged! Problem solved, but not with traditional queueing theory. Here a touch of psychology was needed. And so was born the psychology of queueing, the same year (1955) that Walt Disney opened his first amusement park—in Anaheim, CA. Over the years, the Disney Company has shown itself to be a true master of designing and managing complex sociotechnical service systems—including its queues. The arts and entertainment services industry comprises about 4% of the US GDP.

Reading Robin's book chapters, with its many useful framings of services provision, I started reflecting on my own personal services experiences and preferences. He says that trust and reliability are important aspects of services. Here is trust: I have used the same travel agent for 34 years! And, yes, I am happy to pay more than what is charged by an anonymous discount Internet-based travel service because I know it will be done right, changes will be easy, and that she ‘has my back’ if anything goes wrong during travel. Car repair: I have an 8-year-old Subaru WRX STI, a rally racing champion. No one touches it except my dealer (and me)! Eight years, one place for maintenance and on rare occasions—repair. They have my back on that car. And I would not trust a random person employed by some discount national auto repair chain to look after this car—which is an extension of me! Medical services: You guessed it, over 35 years with the same organization. Maybe I am too fixed in my ways. But trust in-services are of paramount importance.

Trust goes in the reverse direction as well: One bad service encounter can lead to a lifetime pledge never to patronize that organization again. The median age of students in a typical graduate class that I teach at MIT is 25. I ask them, “How many of you have had such a bad service encounter in your lives that you have pledged to yourself never ever to go back there again?” These are 25-year-olds, less than 10 years from living with their parents. And, invariably, over half the class raises their hands! How many providers of services are aware of this fact? That continual excellent quality service is required for customer retention. Customer loyalty may go only as far as the next service encounter. Robin Qiu drills the lesson home in this important book.

Services are nuanced, not readily quantified into various measurement bins. Robin describes this in many ways. From my life in Lexington, MA, a historical suburb of Boston with a population of 28,000: We have two Starbucks, one Peet's Coffee, and seven Dunkin Doughnuts! Plus various convenience stores and quick-stop shops located at gasoline stations—all serving coffee to go. I guess Lexingtonians are highly caffeinated! From my home I prefer to drive to the third closest Dunkin Doughnuts. Why? The coffee and food products and prices are identical to each other. Answer: Only in this shop do I get greeted each time with sincere friendly smiles, as if they really want to see me and are happy to have me as a customer. Plus, the place is a neighborhood hangout with many retired folks just sitting around, enjoying each other's company, and passing the time of day—a type of nice ‘bar scene’ in a coffee shop. The ambience is just right. My minute or two of extra driving is worth it! Again, how many “time-and-motion” type studies would ferret out these concerns? I do not think I'm unique in valuing such nuanced aspects of services as important. Robin Qiu hits the nail on the head. Many others miss it completely.

After reading Robin's book, we would know that there is only one topic he discusses for which I have a minor disagreement: Internet-based services. To allude to an ‘alien’ terminology, he equates these to a type of “Service Encounter of the First Kind,” that is, rather distant and impersonal. (In the 1977 movie, Close Encounters of the Third Kind, an encounter of the first kind was an alien encounter beyond 500 ft—implying little closeness, complexity, or subtlety.) I agree with him for many Internet services, such as those associated with airlines, hotels, and rental cars. But, there are Internet-based services such as Etsy (https://www.etsy.com) that resemble personal face-to-face interaction. You might call these “Close Service Encounters of the Third Kind,” that is, up close and personal, nuanced, and complex. In fact, I have found web sites such as Etsy better than shopping mall face-to-face interactions because I am dealing with the proprietor of a small artisanal business and his/her future success depends 100% on customer satisfaction. The email ‘back-and-forth’ between proprietor and customer often resembles a conversation of an old country general store of the 1800s! Writing reviews online for all to see can show each customer's satisfaction or dissatisfaction. It is difficult for the average customer to have that type of impact with impersonal national chain stores, with either face-to-face or Internet-based service encounters. My hunch is that Robin will agree with me and say that I may have misread the book with relation to all Internet-based services! And I am sure he would be right!

It is an honor that Robin has asked me to write this foreword. Enjoy the book. See all the many faceted aspects of services that Robin describes and structures. Also, reflect back on your own personal experiences with services, and you will see that Robin hits the mark virtually every time. In addition, if you are in a planning or managerial role in a service firm, you and your company can gain significant competitive advantage listening to what is said in this book. A service is a complex sociotechnical system, and those who recognize it as such are bound to prosper.

Richard C. Larson

Engineering Systems Division

Massachusetts Institute of Technology