Business Processes
Business Processes - Lecture Summary
Lecture 1: Introduction to Operations and Processes
- Customer utility is a measure of the customer preference of a product or service. There are
three drivers of customer utility:
1. Price - the total cost of owning a product or receiving the service. This includes expenses
such as shipping and financing etc.
2. Inconvenience - the reduction in utility that results from the effort of obtaining the product or
service. This includes:
• Location - the place where the customer can get a product of service.
• Timing - the amount of time that passes between ordering and receiving a product or service.
3. Consumption Utility - a measurement of how much you like a service, ignoring the effects of
price and its inconvenience. Consumption ability comes from various attributes:
• Performance - subcomponent of consumption utility capturing how much a customer desires
a product or service.
• Fit - subcomponent of consumption utility that captures how well the product or service
matches with the uniqueness of a given consumable.
- To illustrate consumer utility:
- Capabilities include the dimensions of the customer's utility function a firm is able to satisfy.
Capabilities allow a company to do well on some but not all components for customer utility.
- Market segments are sets of customers who have similar utility functions.
- Trade-offs are the need to sacrifice one capability in order to increase another one.
- Strategic trade-offs include selecting inputs and resources, the firm must choose between a
set that excels in one direction of customer utility or another, but no single set of inputs and
resources can excel in all dimensions.
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Business Processes - Lecture Summary
Lecture 1: Introduction to Operations and Processes
- Customer utility is a measure of the customer preference of a product or service. There are
three drivers of customer utility:
1. Price - the total cost of owning a product or receiving the service. This includes expenses
such as shipping and financing etc.
2. Inconvenience - the reduction in utility that results from the effort of obtaining the product or
service. This includes:
• Location - the place where the customer can get a product of service.
• Timing - the amount of time that passes between ordering and receiving a product or service.
3. Consumption Utility - a measurement of how much you like a service, ignoring the effects of
price and its inconvenience. Consumption ability comes from various attributes:
• Performance - subcomponent of consumption utility capturing how much a customer desires
a product or service.
• Fit - subcomponent of consumption utility that captures how well the product or service
matches with the uniqueness of a given consumable.
- To illustrate consumer utility:
- Capabilities include the dimensions of the customer's utility function a firm is able to satisfy.
Capabilities allow a company to do well on some but not all components for customer utility.
- Market segments are sets of customers who have similar utility functions.
- Trade-offs are the need to sacrifice one capability in order to increase another one.
- Strategic trade-offs include selecting inputs and resources, the firm must choose between a
set that excels in one direction of customer utility or another, but no single set of inputs and
resources can excel in all dimensions.
!1
