Many companies have successfully transformed their manufacturing, R&D, and other business functions, improving their performance while stripping out cost. Yet far fewer have optimized their service operations, even though they can have an outsized effect on customer acquisition and retention. When service levels and costs are properly balanced and optimized, they can deliver a substantial and sustainable competitive advantage that competitors will find hard to match.

By their nature, service operations are often labor intensive and complex to manage. Repetition and consistency, typical hallmarks of excellence in service operations, can work against a company that is trying to achieve step-change improvements in processes and behaviors. Additionally, executives across many industries are finding it increasingly challenging to keep service costs in check (especially labor costs, the single largest cost component of any service operation) while maintaining service levels. Recent technological advances - for example, self-service kiosks commonly found in airports, banks, and hotels - have helped improve overall productivity, but technology is only one part of the solution.

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