Why variation reduction is not everything: a new paradigm for service operations

Highlights that one service industry in the USA ‐ health care ‐ has accepted high inherent rates of variation into its process designs. Notes that, increasingly, health care industry leaders recognize that elimination of unnecessary variation is a necessary, but not a sufficient, condition for producing quality professional services at reasonable costs. Using the innovation model of Boynton et al. (1993), identifies continuous improvement, rather than mass production, as the key step in the rationalization of what has been a craft industry and the ultimate objective of delivering health care in a mass customization mode. Claims, however, that it is not sufficient, because high levels of inherent variation will continue to exist and must be managed, even in the best of all possible worlds. Reviews the health care experience (in the context of that model) to suggest how service operations managers and researchers should conceptualize variation, and then discusses what that conceptualization of variation implies about how operations management should treat variation in its modelling and decision making.