Why sell a light bulb when you can sell a lighting system? The design, installation, operation and maintenance of more capable lighting systems that leverage advanced automation and control provides a service to customers beyond just the purpose of a bulb itself. When we look at traditionally product-based organizations there is often an evident shift to add services to their offering. Rather than just manufacture and sell a product, organizations chose to also sell and deliver a service that uses or supports their product.
For years we have heard reports that global economies are shifting more and more towards services and away from product manufacturing. In the U.S. alone over three-quarters of workers are service-oriented. Even low income countries indicate that services contribute to over half their GDP. In a short survey by APQC earlier in 2015, more than 80 percent of the respondents indicated their organizations are primarily service based or a mix of both product and service.
As John Tesmer discussed in a previous blog, there are many sources for changes to the content in the PCF. The changes I will talk about here today were suggested by our friends at IBM, specifically in the Institute for Business Value. Releases like this one couldn’t happen without their suggestions and reviews. John’s going to post something in the coming weeks where we look at some of the individuals at IBM who contributed to this release.
In addition to insights from our friends at IBM, APQC has also learned from the development of its industry-specific Process Classification Frameworks® (PCFs). The recently developed City Government PCF and Health Care Provider PCF are primarily service focused. And while they both align with the overarching Cross-industry PCF, the lack of structure around service delivery highlighted a limitation that needed to be addressed.
The lack of emphasis on service delivery has resulted in one of the most significant changes in the soon to be released Version 7.0 of the Cross-industry PCF. There will now be 13 process categories, splitting the current category 4.0 Deliver Products and Services, into two standalone categories: delivering physical products and delivering services.
As we looked closer at the processes for physical product and service delivery we identified six key differences:
Product delivery is focused on build and transport; while service delivery is operational.
Products are delivered through distribution; while services are typically delivered through projects, continuous support functions, or discrete instances based upon a request for service or incident.
Supply chain for products is dominated by the procurement of raw materials. On the other hand services supply chain is dominated by the procurement of service providers.
Planning is focused on the availability of materials and production capacities for product; while services’ planning is focused on staffing and availability of human resources.
Production performance is driven by the flow of materials for product and service delivery is driven by the flow of information and knowledge.
Finally, the warranties for product involve returns or reverse logistics; while services warranties involve redoing the service and/or refunds.
Taking these factors into account, the supply chain and procurement processes will remain within the product delivery process category. While those processes are also part of the value streams for service delivery a core principle of the PCF is to only have a process once in the framework. Hence, given the greater complexity of supply chain for product manufacturing, process category deliver physical products was the most logical location for those processes.
The service delivery category on the other hand elevates and expands the previous process group (or level-2 process) to reflect the breadth and complexity that exists to plan and manage services within organizations. Just like a product line that may have multiple variations with differing and increasing capabilities, you may have a service that can have multiple variations to support different purposes. Each does not have to be its own process; the “what” is the same. Hence, it will only show up a single time in the framework. In its most simple form, service delivery focuses on resource planning and the processes for initiating, executing, and completing the delivery of services.
PCF v7.0.0 will be officially released at APQC’s 2015 Process Conference this month and available for download shortly thereafter. Those of you who have registered on APQC’s website will be among the first to download it. As always, it will be available at no cost from at www.apqc.org/pcf.
Jeff Varney can be reached on LinkedIn or by Email at firstname.lastname@example.org. You can also join the conversation at APQC’s Process Classification Framework LinkedIn Group.