Market Heterogeneity and Local Capacity Decisions in Services

Dennis  Campbell; Frances X. Frei

Article | Manufacturing & Service Operations Management

Market Heterogeneity and Local Capacity Decisions in Services

Abstract

We empirically document factors that influence how local operating managers use discretion to balance the tradeoff between service capacity costs and customer sensitivity to service time. Our findings, using data from one of the largest financial services providers in the U.S., indicate that customer sensitivity to service time varies widely and predictably with observable market characteristics. In turn, we find evidence that local operating managers account for market specific customer sensitivities to service times by deviating frequently and in predictable ways from the recommendations offered by a centralized capacity planning model. Finally, we document that these discretionary capacity supply decisions exhibit a strong learning effect whereby experienced operating managers place more weight than their less experienced counterparts on the market-specific tradeoff between service capacity costs and customer sensitivity to service times. Overall, our results demonstrate both the importance of local knowledge as an input in service operations and the potential for incorporating richer data on customer behavior and preferences into service cost and productivity standard metrics.

Keywords: Customer Satisfaction; Cost; Standards; Service Delivery; Service Operations; Performance Capacity; Performance Productivity; Financial Services Industry; United States;

Format: Print

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Citation:

Campbell, Dennis, and Frances X. Frei. "Market Heterogeneity and Local Capacity Decisions in Services." Manufacturing & Service Operations Management 13, no. 1 (Winter 2011): 2–19. (Lead Article.)

Pallak Seth, Group CEO of PDS Multinational Fashions, is contemplating options to bring better collaboration across his global apparel supply chain platform. PDS, a group of 50-plus subsidiary companies, each led by its own CEO and with different apparel industry specialties, has grown rapidly over the past decade, yet the industry is increasingly competitive and challenges remain constant. Looking for ways to reach the Group’s 2023 goals of $2 billion in revenue, Seth and his executive board are considering two ways to increase collaboration and reward performance: a joint P&L approach, to drive partnerships across the subsidiaries, and an employee stock option plan, to unlock value across the Group.

Book | 2020

Unleashed: The Unapologetic Leader's Guide to Empowering Everyone Around You

Frances X. Frei and Anne Morriss

When leaders and aspiring leaders seek out advice, they're often told to try harder. Dig deeper. Look in the mirror and own your natural-born strengths and fix any real or perceived career-limiting deficiencies.

We offer a different worldview. We argue that this popular leadership advice glosses over the most important thing you do as a leader: Build others up. Leadership isn’t about you. It’s about how effective you are at empowering other people—and making sure that this impact endures even in your absence. We show through inspiring stories from ancient Rome to Silicon Valley, the origins of great leadership are found, paradoxically, not in worrying about your own status and advancement, but in the unrelenting focus on other people’s potential.

Unleashed provides radical advice for the practice of leadership today. Showing how the boldest, most effective leaders use a special combination of trust, love, and belonging to create spaces where other people can excel, we offer practical, battle-tested tools—based on our work in companies such as Uber, Riot Games, and others—along with interviews and stories from our own personal experience to make these ideas come alive. This book is your indispensable guide for unleashing greatness in other people...and, ultimately, in yourself.

Keywords: leadership skills; belonging; Leadership; Management Skills; Trust; Organizational Culture;

Citation:

Frei, Frances X., and Anne Morriss. Unleashed: The Unapologetic Leader's Guide to Empowering Everyone Around You. Boston: Harvard Business Review Press, 2020. View Details

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Market Heterogeneity and Local Capacity Decisions in Services

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