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Service s ought be a beneficial undertaking from both the customer and service provider perspectives. Value creation for the customer should result in value capture for the service provider. This mutual welfare is important for the economic viability of services. It avoids losses on both sides of the relationship in real terms. Otherwise, sooner or later there will be tension in the relationship and at least one of the parties will be wishing for alternatives.
It is not unusual to start with the idea of efficiency. The notion of value itself is commonly based on efficiency. There are several notions of efficiency. The one used here is the ratio or proportionality of specific output in relation to the necessary inputs in terms of resource s. Measures of efficiency depend on the type of input resource. For example, they could be based on minutes, full-time equivalents (FTE), square feet of space for facilities and equipment, gigabytes of storage, or simply financial equivalents of those units.
Efficiency goes to waste when output or outcome is not fit for purpose or fit for use. This is all too common in the case of services, because value is largely intangible. Therefore efficiency should have the guide rails of some desired effect. Effectiveness is the quality of being able to bring about a desired effect. In the context of services the two primary effects are utility and warranty (Figure 2.2).
Increasing the efficiency of a process can effectively increase remaining capacity to support additional units of demand. Increase in efficiency can result in more units of demand served from the same amount of a resource. Improvements in Service design and Service Operation can drive such efficiency gains. There is feedback and interaction between efficiency and effectiveness (Figure 9.2).
Figure 9.2 Efficiency and effectiveness
An increase in efficiency can lead to an increase in effectiveness, which in turn can result in a further increase in efficiency until some optimization limit is reached. A shortfall in effectiveness when addressed by allocating more resources to recover the situation results in a decrease in efficiency. Efficiency losses in turn can lead to lower effectiveness because of the lower potency of each unit of output. These interactions between efficiency and effectiveness result in drifts or lifts in performance.
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