Great failure AMC – keep ‘em coming!

I’ve written about the service innovation going on at AMC Theatres – both the introduction of Fork & Screen and the rollout of reserved theatre seating.

So I was surprised when, taking in a movie with my children, I noticed this sign stating that AMC is discontinuing the reserved seating process later this month.

AMC says that the while theatres were intending to improve the viewing experience by introducing assigned seating, customers were not receptive to the $2 additional charge above the standard movie ticket required to cover the cost of the additional technology to guarantee a seat and an usher to guide you to it.

It has been positioned as the kind of value that a customer appreciates but isn’t willing to pay extra for. This kind of decision happens all the time, when would-be innovations are doomed because customers aren’t willing to pay for them. If this were a hyper-competitive local market where little things made the difference in brand selection, I might suggest that the “sunk costs” of the technology were just that, and that any additional value perceived by the reservation system would help bunker them from the ever-present competition. But it’s not. AMC is almost the only choice in local cinema, and if the variable cost of the ushers isn’t offset by people willing to pay for the experience, the sunsetting of the offering (or storing it in a closet until a more appropriate time) is likely best.

But beyond the immediate decision, I’m hoping more that someone at AMC isn’t fretting over the result and hoping that they never make a mistake like that again.

Whatever the strategic decision, I appreciate that the theatre was willing to take the chance that ultimately made the mistake. I wish that more service companies I deal with did the same. Many service encounters could use a fresh perspective and the benefit of a new take on their old models. Movie experiences are high among them, having not changed much since the 50’s.

Companies like AMC aren’t letting nostalgia for one format get in the way of creating a better model. Many other service businesses – those stuck in the “this is how it has always been done” mode, should take note.

Sewing the seeds of defection.

This holiday weekend, my county got a good lesson in how a failure with one service encounter can create a trcikledown of additional failures. The local water company, WaterOne, experienced a loss in pressure in their lines. Because they couldn’t guarantee the safety of the water during that time, they issued a countywide water boil advisory for roughly 36 hours.

From the beginning to its (thankfully) rapid end, the boil advisory impacted local residents and businesses significantly.

The idea that Johnson County might not have safe drinking water for a few hours sent residents into a frenzy. Water flew off the shelves of local grocery stores, leaving local businesses failing their regular local customers at a moment when those customers perceived they needed them most.

Service businesses that use water as an input to their experience (i.e. most food services businesses, including this Starbucks) had a major operations hurdle to overcome. At best, they increased cost to work around an input quality issue not of their making. At worst, they were unable to operate.

For businesses that depend on other services as an input to their experience, what is their recourse for the a failure like this? Usually, the utility tells them they don’t have to pay for service for the period in which it was inaccessible or unreliable. But what about increased operational cost? Lost revenue? Utilities are often insulated from the threat of customer defection due to dissatisfaction. They almost as often act that way.

It’s a reminder that service failures at utilities are unusual, but when they happen, they’re deeply felt. They're the kinds of events that, even if they only ever happen once, get companies thinking about contingency plans, “what-if” scenario planning based entirely on the idea that “we don’t ever want to go through that again.”

No matter how secure a business is in their local market - even if they enjoy a monopoly - this exercise gets customers looking for alternatives.

"Dinner & a movie" gets a completely new meaning.

Dinner & a movie.

You’ve heard the phrase. Likely been on a date that fits the description.

How did it play out? What were the steps?

For most of my adolescent / adult life, dinner & a movie has involved me accompanying someone to dinner. We go through the full service encounter of a meal. Maybe it includes drinks. At the end of that service experience, we then we leave the restaurant and go to a movie to engage in another, completely separate, service experience.

So why has it taken so long to put these experiences together in a single service experience?

AMC Theatres’ Fork & Screen is the type of in-theatre dining experience that is quickly becoming more common. It combines a small capacity theatre with a full-service restaurant & bar for in-viewing table service.

It’s service genius, but I don’t feel that it should have been. To moviegoers, it is a unique experience, but it simply combines two pre-existing experiences in a new way. Two experiences that have been linked since both have been in existence. So why is Dinner AT a movie only becoming more common now?

Because as business owners and service managers tend to be narrow in our definitions of their business model. On one hand, restaurants are busy trying to be the most successful restaurant on their block, in their category, whatever. On the other, theatres are trying to take share from the other local theatres - so much so that it takes a special brand of myopia to operate a movie theatre, knowing that many patrons are coming directly from a meal, have in your theatre a foodservice operation, yet never link that perhaps you could be stealing share from another industry entirely by viewing your business model a little more expansively.

Somebody looks a little more expansively at what customers do before and after their experience, and bring forward a new experience that either existing model are at a disadvantage competing against.

So what’s your industry’s “dinner & a movie”?

Alex Trebek's Service Innovation Contribution.

The IBM Jeopardy challenge is captivating technophiles and game show fans alike this week as Watson – IBM’s artificial intelligence designed to answer natural language questions – competes against two all-time Jeopardy champions. Reactions to the highly televised demo have ranged from outright wonder to outright fear – the latter based on an idea that Watson may somehow show up tomorrow to compete for a job you’re applying to. (If that is the case, I’d suggest working on your trivia skills for the interview.)

The demonstration also has drawn me in. Not because of trivia or tech inclinations - both of which I may have - but because I’m a service geek.

In the last six months, I’ve had the pleasure of seeing two Senior IBMers talk about the Jeopardy Challenge, which we now know as Watson: first Nicholas Donofrio at the Kansas City Chamber of Commerce Innovation Conference and then Robert Morris, keynoting at the WP Carey Compete Through Service Symposium.

Both speakers shared a vision of the Jeopardy Challenge algorithm intelligence initiating a service quality revolution similar to what we saw in product quality in the latter half of the last century.

It makes for good strategy that the world’s largest service business positions itself to lead in a global service economy that for some countries already approaches 75% of GDP.

In the IBM view, service quality refers mostly to the ability for service encounters to produce a successful outcome. It's these service consistency & reliability problems – the type for which understanding of solving problems expressed in human language is critical – that are the future for Watson.

It makes sense. Variability among front line service employees, customers and in the service environment make for results that are more difficult to replicate than in product businesses. Putting Watsn-like technology on the front line of service would help reduce variance in the experience customer interaction-to-customer interaction.

But service quality isn’t just about reliability. Successful service experiences may be based as much on the less concrete experience dimensions of responsiveness, empathy and assurance as they are on outcome reliability. Because of this, prudence needs to be used in applying the technology. It carries the risk of improving reliability of outcomes, while at the same time reducing the ability to provide the less tangible responsiveness, empathy and assurance aspects of service quality that many service encounters are ultimately judged by.

While Watson is gaining praise for its second day dismantling of a pair of Jeopardy Hall-of-Famers, I’m still more interested in what it's going to do next.

The Wrong Tool for the Job.

I left my drycleaner for Tide Cleaners, and haven’t regretted it in the least.

Master of the product world, Proctor & Gamble also knows how to produce a service encounter using process, people and the physical service environment as effectively as they use promotions in a retail environment.

Still, when my old cleaner sent me a handwritten note to let me know that they have missed my business and asking that I call, I felt compelled to talk to them – to give them a chance or just some advice.

My conversation with their district manager was pleasant. She wanted to know why I had left and what they could do get my business back. Solid business fundamentals - when previously loyal customers leave, work to understand why they did and try to win them back.

I told her I wasn’t dissatisfied with their core service or price, but for me, Tide was providing a better experience by putting more convenience into a service I see generally as an inconvenience. I referred specifically to using the drive thru, as well as the off-hours drop box for times when my only available time was after close-of-business. She was aware of Tide improving on the convenience aspect of the experience, and told me she was looking into ways they could be more convenient themselves.

Then as we wrapped up, she offered me a store credit if I’d use them again.

I reiterated that I wasn’t dissatisfied with their prices - that I was looking for something else - thanks but no thanks. Still, she insisted they apply a store credit in the event that I would try them again. I told her what I really wanted was improvement on attributes not related to the price or the actual drycleaning service.

At its most basic, value is what you perceive you get, relative to what you perceive you give. A company can improve it for a customer by increasing perception of what they get or by decreasing their perception of what they give.

My ex-drycleaner did what so many businesses do when competition changes a customer’s perception of their value. Almost reflexively, they improved value in the easiest way possible – by reducing price, even when it wasn’t merited and wouldn’t be effective.

When someone tells me how difficult their business is / industry is and how tight margins are, I can’t help but wonder whether things really are that tough, or whether they choose to make it tough by following the easiest-yet-most-vulnerable path to gaining or keeping a customer.

Service like a highway with no fast lane.

Stopped in to Costco on Saturday of the holiday weekend.

In a hurry. I had a small gathering to host, and I was under orders to come home with two platters of various vegetables, meats & cheeses, or to not come home at all. (The departure call of Spartan wives, updated for 2010 suburbia)

But Costco is no place for a person in a hurry, especially on a holiday weekend. Long, winding lines of cargo ship-capacity shopping carts stacked to adequately resupply a 50’s-era bomb shelter, and there I am, standing with two items.

The self check-out line helped, but not nearly enough. At a point, I would have gladly paid to skip the line. Not double, but maybe as much as 25% more.

For large-format retailers, (such as Costco, Sam’s Club, Home Depot) I wonder why an premium express line hasn’t been created for the busiest times to help serve customers in a rush. It could definitely be done, though they would have to set some rules. For example, no more than 5 items. No cash. No coupons. No price checks. They would also have to provide assurance. “Out in 60 seconds, or your 20% up-charge turns into a 10% discount.” I would have used it, and looking around, I wouldn't have been alone.

The warehouse format retailers perhaps didn’t intend a single-item shopper, but they get them. Forced to serve customers that don’t fit well with other customers, the company can either stick to the efficiency of the basic model knowing some customers will be dissatisfied, or serve customers with different needs differently, perhaps taking the opportunity to make a premium margin on a premium service level.

No customer can be characterized as shopping solely based on speed & convenience or solely on cost. If your standard service model trades these characteristics off to best serve the regular customer, look for ways to serve them in those times they need a different kind of delivery. It’s likely they’ll gladly pay a little more, and you get to provide service to your best customers along more than one dimension.

Kindle douses flame for sharing.

My father knew promote desired behavior through incentive. As a youngster, like many kids, I had an allowance. But Dad had always wanted me to read and be interested in books and learning. To provide incentive to acquire books (we lived in a small farming community with no public library) and read, book purchases didn't count against the allowance. Since they were "free currency", I indulged often, and a lifetime love of reading developed.

It is because of that background that while I have purchased and owned many books, I possess relatively few. When I read a book, I'm usually only a few chapters in by the time I decide whom I'll give it to when I'm finished.

Which brings me to the experience issue I’ve developed with my Kindle.

I received a Kindle a few short months ago at Christmas. I love it. I love the weight, love the readability, love the interface which makes the Amazon bookstore open to me 24/7/365, regardless of whether I'm riding my couch or riding down the actual Amazon.

(As an aside, the downside of the Amazon Kindle bookstore is that the long tail of the internet got shorter. BA (Before Amazon) I was limited by the inventory of the bookstore. If I wanted greater selection, I needed to find a bigger bookstore. Amazon gave me limitless access to every title - new, used, or out-of-print. AK (After Kindle) my selection has been reduced again, with not every title available.)

What I don't like about my Kindle experience, is that I'm no longer able to share the joy of what I read with others the way I used to. Sure, I can recommend that someone read a book, or buy them a credit or a hard copy version, but it's not the same as finishing a book and giving it away with my regards to someone I feel will appreciate it.

I'm guessing that this scenario was well evaluated by Amazon. After all, with readers not able to give away their product-based books, logic would suggest that revenue would rise as the would-be recipient of a free book has to buy one themselves. I’m skeptical, thinking it more likely that a positive reading experience from a gifted book (essentially giving away a product being the highest form of word-of-mouth advertising) leads to future purchases from the same author.

Either way, when considering a dramatic change to an experience, particularly one like the Kindle that turns a product experience into a product-service hybrid, you have to consider all possible touchpoints of the product model and where value might be added through the experience, whether it was intended or not.

An alternative? How about the ability to gift a title once? The argument against is that a grey market for digital books develops, but truthfully, this already existed when books were tangible products. The difference is that now, Amazon could use the gifting information to refine its customer-preference sensing algorithms and promote relevant product suggestions in an entirely new way.

Books & literature are turning into an exclusively paid for experience and we’re unable to either receive or create surplus value through enjoyment and learning. The economic incentive my father so ingeniously used to foster a love of books and a thirst for knowledge has been greatly diminished for those unlucky enough to have the otherwise excellent e-reader experience.

Welcome to the age of co-creation.

It was hardly coincidental that a 140-character message from like-minded service tweep Barry Dalton launched a post on co-creation of service experiences.

He had suggested risk in the proliferation of customer communities for products and services, in that they potentially put the message, delivery and operation of the service out of ‘corporate control’. Further, inaccurate usage information from the customer community could actually create service / product failures.

Barry’s astute observation is part of a developing shift, with both tremendous risk and opportunity, around the experience co-creation that the web in general and social media in particular has enabled.

Customer co-creation is a critical part of any experience. Whether it requires a low level of customer input or deep co-production on the part of the customer, the critical component for a service experience to work is that customers both know their role and are enabled by the service provider to perform it.

In that regard, the internet and social media is almost entirely about co-creation.

Internet channels were first used as ecommerce channels and self-service sites – simple forms of co-creation of a purchase or service experience. But co-creation has developed beyond those simple applications, with service / product user communities, on-demand video “how-to” capabilities, and deep product & service reviews assisting pre-through-post-purchase interactions. With help now everywhere, customers are developing a better understanding of their role than ever before.

At the far end of the spectrum, Twitter and Facebook enable the experience directly through their technology and the aggregation of the networks. Then they get out of the way and let the customers do the rest. Users self-align based on shared interest, debate & advance knowledge subjects self-chosen, and largely self-police the community. With a large number of social media outlets, customer co-creation is the product (service).

The result? Social Media is enabling experience co-creation in ways never before thought of. Customers are becoming higher performers through self education, peer-assisted education through vast user communities, and the proliferation of online service channels.

This shift can be scary. The company now hands a large portion of control back over to the consumers, where the product or service usage information may be incorrect. But tightly linked user communities mean that the information is fairly contained. If it isn’t self policed by other users, the opportunity still exists for the company to monitor and correct misinformation. It makes the product or service stronger to have a user community of 3rd party commentators, even if not every comment is positive.

This shift can also be liberating. Users are developing self service capabilities never dreamed of. As customers become more highly productive in their use of services, they make the company more productive. As their part in delivery increases, so too can their level of satisfaction with a successful outcome. Users have more of a direct hand in the service / product development than ever before, enabling the companies to inexpensively tap into the collective knowledge of those who care most about it.

Customers are already moving on this, so co-creation of your experience is not a choice. The only decisions companies face is how much they can enable, how productive customers can be, and what development they can take away to make the experience that much better.

Let’s all differentiate together.

Forrester's State of the Customer Experience, 2010 found that fully 80% of companies want to use the customer experience as a differentiator.

Is this possible?

80% seems like a lot of differentiating based on the experience, but it depends on what companies mean when they make the statement. If “differentiated” means a company’s customer experience is demonstrably better than their competitors, the concurrent improvement of the competitors’ experience ( at least the rest of the 80%) would mean that as all experiences get better, they would remain every bit as undifferentiated as before. The bar on table-stakes service levels would be raised considerably and the customer would win, but the companies would add cost for the same revenue opportunity.

So should this 80% of companies abandon their objective of differentiating on the customer experience?

Not necessarily, and not because a dramatically smaller percentage than 80% will correctly pursue differentiation along the customer experience.

Differentiation doesn’t have to mean a better experience for everyone – it just has to be a better experience for someone. If a company were to select a customer that represents their ideal and change their business model, the service operation, marketing and support processes to attract and serve that customer better than anyone else possibly could, then would be achievable, more difficult to replicate and worthy.

Every market would have a customized set of offerings in every space, and customers would choose the type of experience they prefer, rather than most current markets where choice consists of extremely similar variations of the same service. In air travel, for example, you might have “the singles airline”, “the families airline”, “the business airline”, “the green airline”, “the exclusive airline”, “the low-cost airline”, and so on, with service experiences tailored to the specific travel scenario.

The problem is, most companies are undifferentiated because they serve the “everybody” market. For these companies, the intention to “differentiate on the basis of the customer experience” is meant as revenue growth initiative in their current model, not the selection of a new service and business model that would truly allow to carve out a sustainable, defensible market and serve it better than anyone else. This kind of experience differentiation would require companies to downsize service operations, intentionally cull customers and expend service enablement and marketing dollars in order to attract and better serve their ideal customer.

The service business willing to identify their market in real terms and size to it is also the one with the freedom to change their service model to differentiate on the basis of the customer experience.

Service innovation wears a straitjacket.

Last night I watched a rerun of Anthony Bourdain’s No Reservations Vancouver episode, drawn in by images of familiar restaurants and street corners from my 4 years living in on Vancouver Island. In the episode, he visits Sooke Harbour House, a renowned restaurant unique in its commitment to local ingredients, sourcing 95% of ingredients from within a 30 mile radius.

Bourdain makes an interesting comment to chef Ed Tuson, observing that their self-imposed straitjacket must be creatively enabling. Tuson provides an example of having to "create" coconut for a dish using shaved carrots, ginger root, flavors from petals of some local flowers and a few other ingredients.

A severe self-imposed restriction forces him to see ingredients not as they are, but in new terms of what they could combine to become.

Businesses have the ability to do the same thing.

Yesterday I wrote about how great service companies win fans by choosing one service attribute to be absolutely obsessive about. Obsessive focus on that self-identified business model driver is the same sort of obsession that Bourdain talked about using to enable creativity.

Consider Southwest, whose early obsession with minimizing gate time by turning planes in 10 minutes forced them to look at their ground operations completely differently than other airlines. When Southwest had made all the productivity improvements they could from its employees, they turned to their customers as productivity coproducers. Cattle call seating, travelers helping tidy the planes, the online check-in process, even the plug-ins and club chairs – all are intended to get travelers to help Southwest turn a plane as fast as possible.

In return for productivity gains, Southwest is willing to provide coproducer value. Southwest knows that separating the loading of luggage and travelers speeds the departure process. In return for the inconvenience of checking, they reward travelers with no fees for checked baggage. (And flights that arrive on time)

It's likely that few of these innovations and productivity gains would have been realized if they hadn't obsessed about service model to the point that it forced them to think creatively about expanding their productivity resources.

For great leaps in service innovation, embrace the obsession straitjacket to creatively look at the service model the way that those without it can't.