CASE18KidZania:SHAPINGASTRATEGICSERVICEVISIONFORTHEFUTUREOVERVIEWLatein2013,KidZania'smanagementteamundertheleadershipofitsfounderandCEO,XavierLopezAncona,helditslatestmeetingatthecompany'sMexicoCityheadquarterstodiscussthepossibleroll-outtootherlocationsofnewexperientiallearningconceptstestedatitsCuicuilcokids'edutainmentpark.Theteamhadprepareditselfoverseveralmonthsforwhathadbecomeacomplexdiscussion,basedon15yearsofsuccessdevelopingandoperating“parks“wherechildrencouldrole-playadultactivities,aboutthedirectionthecompanyshouldtake.Havingrecentlyadoptedexperientiallearningasitscorestrategy,theleadershipteamwaschallengedtounderstandwhatthatmeantintermsofprioritiesandtangibleprojectsofthekindbeingbroughttothecompanybypotentialpartnersaswellasthosetestedatCuicuilco.WithinitialoperatingresultsfromCuicuilcoinhand,Lopez'teamhadevidenceonwhichtobasedecisionsaboutwhether,where,andhowexperientiallearninginitiativesshouldbeintroducedelsewhereintheKidZaniaglobalnetwork.AnotherimportantdecisionconcernedtheformatforthefirstKidZanialocationintheUS.Inaddition,franchisingopportunitiescontinuedtoarise.ThetwolatestproposalswerefromtheMiddleEastandEurope.TEACHINGOBJECTIVESToidentifythemainelementsofthestrategicservicevisionwhichhavebeenkeysforKidZania'ssuccess,allowingittodevelopanewmarketinthechildren'sentertainmentindustry.Toestablishaframeworkforevaluatingproposalsfornewbusinessdevelopment.Toidentifytheimpactsandimplicationsofdifferentstrategicgrowthalternativesundertheumbrellaofan"experientiallearning“definitionforthebusinessadoptedbyKidZania'smanagement.?2015PresidentandFellowsofHarvardCollege.EmeritusProfessorJamesL.Heskett;ProfessorJavierReynoso(Chair,ServiceManagementResearch&EducationGroup,EGADEBusinessSchool,TecnologicodeMonterrey,Mexico);andSeniorResearcherKarlaCabrera(ServiceManagementResearch&EducationGroup,EGADEBusinessSchool,TecnologicodeMonterrey,Mexico)preparedthiscasewiththeassistanceofCammieDunaway(KidZaniaGlobalCMOandUSPresident).Itwasreviewedandapprovedbeforepublicationbyacompanydesignate.FundingforthedevelopmentofthiscasewasprovidedbyHarvardBusinessSchoolandnotbythecompany.HBScasesaredevelopedsolelyasthebasisforclassdiscussion.Casesarenotintendedtoserveasendorsements,sourcesofprimarydata,orillustrationsofeffectiveorineffectivemanagement.AlldollaramountsreferredtointhetextareinUSdollarsunlessotherwiseindicated.Activity:TaxOfficeDrivingResearchStreetLabSupermarketSpafor

AdultsCriteria:Ratioofchildren/.17hourtofootprint.17N.A.size(insq.mtrs.)2.0 .38 .44N.A.BrandqualityofindividualpartnersPopularity(highNumbersbest)Sizeofpartners,annualcontribution(highnumbersbest)FitwithconceptStaffingrequiredperchild(highnumbersbest)Uniformlyhigh17 112 1GoodGood ?2 3 113GoodNAN.A.NAN.A.PossibleConclusions:Thedrivingstreetisamustifspaceallows.Theresearchlabisthemostexpendableoftheseactivities.Thespaforadultshastobeevaluatedbyitself;itisimpossibletocompareitonthecriteriashown.Adecisionwilldependonthedemandevidencedforthespaatexistingfacilitiesorthroughmarketingresearch.Source:Casewriters.

ExhibitTN-2ComparisonofTwoFranchisingOpportunitiesLocation:Criteria:Experienceoffranchisees?Governmentconnections?Importanceofgovernmentconnections?LikelyspeedwithwhichthefacilitycanbeputintooperationSizeofmarketPresenceofcompetingactivitiesLikelihoodofrepeatbusinessImportanceofrepeatbusinesstofinancialsImportanceofrepeatbusinesstoconceptFitwithgeographicclustersGrowthpotentialRevenuepotentialEuropeExtensive?

■LowSlowerEuropeExtensive?

■LowSlowerVeryLarge

Many

LowerModerateHighLimitedModerate4XMiddleEastLimitedStrong

HighFasterSmallFewHighHighHighGoodHighXSource:Casewriters.STUDYQUESTIONSUsingservicemanagementbestpracticesarecriteria,whichofthethingsKidZaniaisdoingimpressedyouthemost/theleast,andwhy?Whataretherisksinthisbusiness?HowdoesKidZania'smanagementamelioratethem?WhatdoyouthinkarethemainchallengesandimplicationsbeingfacedregardingthechangesintheserviceconceptofKidZania,centeredonexperientiallearning?Consideringtheexperiencegainedfromalltheircurrentparksaswellastheexternalforcesincludingincreasingcompetition,marketregulations,diversityofpotentialnewmarkets,andtechnologyintegration,whatcriteriashouldKidZania'smanagementfollowinselectingspecificactivitiesforitsfuture"cities“toenhanceexperientiallearningwhileremainingprofitable?ANALYSISUsingservicemanagementbestpracticesascriteria,whichofthethingsKidZaniaisdoingimpressedyouthemost/theleast,andwhy?MarketsegmentKidZaniahasaccuratelyidentifiedseveraldifferentmarketsegmentsanddevelopedstrategiesandconceptstofulfiltheirneeds.Foryoungfamilies:KidZaniaincludesfacilitiesforparentsandalsocoversparents5mainconcernssuchassecurity,entertainmentandeducationforchildren.Childrenagedthreeto16lookingforentertainmentcanroleplaydifferentactivities.MostofKidZania'sprogrammingisfocusedonkidsfromagessevento10butalsoincludesactivitiesforolderkids.KidZaniaalsofeaturesseparateareasfortoddlers,whoarenotyetreadyformoreseriousrole-play.Familiesarealsoprovidedtheopportunitytoorganizeprivateparties.Forschools:Theymightbeattractedbythehighlyeducationalnatureoftheconcept.Forcompanies:CompaniescanutilizeKidZaniaforgatherings,productlaunches,orforspecialprogramssuchassummercamps.CompaniesasindustrypartnerscanfindinKidZaniaaninnovativewaytoattractfuturecustomerswhilecontributingtochildren'seducation.ServiceConceptKidZaniawasconceivedasanedutainmentconcept(educationandentertainment)thatinviteschildrentorole-playadultactivitiesinrealisticallythemedenvironments,programmedtomimicreal-life.Eventhoughtherole-playconceptcannotbeprotectedbypatentorcopyright,itsverycomplexity,ifexecutedwell,willdiscouragemanycompetitors.KidZaniahasbeenabletodifferentiateitselffromthecompetitionbecauseofitsstrongfocusonaneducationalcomponentandhigherqualitystandards.KidZania'sserviceconceptrepresentsaninnovativeideabasedonthecombinationofeducational,funandrole-playcomponentsforchildren.Intermsofresultsdeliveredtovarioustargetmarkets,KidZaniaprovidesanenjoyableexperiencecombinedwitheducationfbrchildren;everythingfromeducationto"productivebaby-sitting"fbrtheirchildrenfbrparents;anenjoyableelementofaprogramofeducationfbrschools;apotentiallyattractiveadvertisingandfuturecustomer“recruiting”vehiclefbrbusinesspartners;andanentertainmentvenueforcompaniesascustomers.Inshort,therearemanymarkettargetsandresultsassociatedwiththisbusiness.Theyrepresentbothopportunitiesandpotentialforconfusioninwhatisaverycomplexbusinessstrategy.OperationsEachKidZaniaisplannedinaprocessthatbegins12monthsbeforetheopeningofafacility.Allelementsoftheexperiencearedefined.Activities,facilities,industrypartnersandstaffareevaluatedandselectedfollowingacombinationoflocalandglobalcriteria,aswellasastorylinesupportedbythematiccomponents.Technologyisusedasanenablertoassuresecurityofallvisitorsandemployees.Selecting,training,andretainingstaffisoneofthemajorconcernsforKidZania.ThishasalsoledtothedevelopmentofaKidZaniaUniversitytotrainlocaltrainerswithafocusonhelpingeveryoneunderstandtheuniquecomponentsoftheKidZaniabrandexperienceaswellasgoodcustomerservicepracticesandoperatingprocedures.TheintegrationofindustrypartnershasplayedakeyroleinKidZania'sexperience,providingfinancialleverage,brandpowerandrealisticmaterials.ServiceDeliveryEventhougheachKidZaniahaslocalelements,avisitor'sexperienceiscarefullydesignedandexecutedbystaffinawaythatallfacilitiesintheworldmaintainthesamequalitystandards.AKidZaniacustomer'ssatisfactionisconstantlymonitored,andchangesaremadetoofferadifferentiatedexperienceineachvisit.Zupervisorsarecommittedtoenhancechildren'sexperiencesandminimizefactorsthatcouldreducesatisfaction,forexample,waitingtimes.Theloyaltyprogram,BeKidZanian,allowsthecompanytomaintainalinkwithchildrenandalsoofferbenefitsthatextendthescopeofKidZaniabeyondtheboundariesoftheparksthemselves.Whataretherisksinthisbusiness?HowdoesKidZania,smanagementamelioratethem?Thisisacomplexbusinessinvolvingchildren.Thatsimplestatementsuggestsanumberofbusinessrisksinvolvedhere.Somecanbeaddressedbycarefulmanagementwithaclearideaofthedirectionofthebusiness.Otherscanbeaddressedbycareinthedeliveryoftheservice,inparticularthecarefulselection,training,andsupportofemployeesaswellasintensivescrutinyofequipmentandsuppliesprovidedbypartnersforpotentialsafetyissues.Insuranceisnotananswertooperatingrisks.KidZaniacannotaffordbadpublicity,whetherornotincidentsthatoccuratitsfacilitiesareinsuredornot.Parents,ascustomers,areunforgivingiftheirchildrendonothavegoodexperiencesatKidZania.Thereislittleroomforerror.Thisraisesthequestionofwhetherornotfranchisingisappropriateforthisbusiness.Whileitprovidesfinancingandopportunitiesforrapidgrowthandshiftstherisksassuggestedabove,ifthenameKidZaniaisonthesign,regardlessofwhereitislocatedintheworld,theriskisthatdamagewillbedonetothebrandiftheconceptisnotdeliveredflawlessly.Whetherownedorfranchised,theKidZaniaparkreliesheavilyonthequalityofthepeopleithires.Inparticular,theKidZaniamanagementwillhavetoscreenthepeopletheyhirefortheircharacter,peopleskills,abilitytoteach,andpatienceinworkingwithchildren.someofthemhavebeenmodifiedtoofferchildrenaformativeexperienceofthereal-lifejobindustrywithoutlosingthefunfactor.Someofthemoreeducationalactivities,forexample,theEcologicalHousewherechildrenmakeenvironmentallyfriendlydesigndecisions,mayfacealackofinterestbyindustrypartners.Inthisvein,thechallengereliesonmaintainingthebalancebetweentheattractivenessofactivitiesforallactors,includingchildrenandsponsors.Ithasresultedintheselectionofnewtypesofpartnerssuchasgovernmentalornon-for-profitorganizations.Experientiallearningactivitiesrepresentasignificantopportunityfortheinvolvementofgovernmentagenciesinestablishmentslikethetaxoffice,customsandthecoinmint.Thiscouldbelinkedtothesubstantialsupportamongmembersofthemanagementgroupforincludingmoregovernmentestablishmentsas“partners”.OnebenefitofthisinitiativewouldbeimprovedrelationshipswithgovernmentagenciesthatcouldexercisecontroloverKidZania'sfacilitiesincountriessuchasthoserepresentedinthefranchiseproposalsincludedinExhibit1()ofthecase.Inordertomaketheactivitiesmoreeducational,higherinvestmentsarerequired(seeExhibit6).Activitiesmustbedesignedbyaspecializedteamtoassurethatallexperientiallearningelementsarecorrectlyintegrated.Additionalsupportmaterialsandmultimediawithfactsanddatamustbedesignedandplacedinfacilities,andZupervisorsmustbetrainedtoincludethesecomponentsinthechildren'sexperience.Theseactivitiesalsorequireahigher-qualitylaborforceandtechnologyinvestments,andinsomecases,biggerfacilitiessuchasthoseatCuicuilco,representingapotentialdragontheprofitabilityofafacility.Abasicquestionthatcanbeposedtotheclassishowmanagementcan“sell”experientiallearningpersetothepublic.Itisacomplexconcept,andperhapsonebestgivenanothernameinpromotingKidZaniatothepublicandpotentialpartners.Consideringtheexperiencegainedfromalltheircurrentparksaswellastheexternalforcesincludingincreasingcompetition,marketregulations,diversityofpotentialnewmarkets,andtechnologyintegration,whatcriteriashouldKidZania,smanagementfollowinselectingspecificactivitiesforitsfuture“cities”toenhanceexperientiallearningwhileremainingprofitable?CriteriathatstudentsmightsuggestforintroducingandexpandingtheinclusionofparticularactivitiesinagivenKidZaniaparkincludesuchthingsas:thefitoftheactivitywiththeexperientiallearningconcept,theattractivenessoftheactivitytochildrenandtheirparents,thecomplexityofstaffingandoperatingtheactivity,thecapitalinvestmentrequiredfortheactivity,therevenueandprofitpersquarefootassociatedwiththeactivity,andthefitbetweentheactivityandthecultureofthecountryinwhichthefacilityistobelocated.UsingthesecriteriaandothersshowninExhibit1,the"drivingstreet"appearstobethemostattractiveoftheproposedactivitiesandthe"researchlab”theleastattractive.Theproposedspaforadultswillhavetobejudgedonadifferentsetofcriteria,withaheavyemphasisonrequestsfromparentsormarketingresearchcarriedoutatexistingfacilities.AlthoughKidZaniahasaprovenprocessforthedevelopmentofnewcities,thefocusonintegratingexperientiallearningandexternalforcesmakethebalancemoredifficulttomaintain.Furthermore,consideringthecompany'svisionofbecomingaleaderinexperientiallearningcontent,itmustalsoconsiderhowtheactivitiesselectedforfuturecitiessupportthecompany'sstrategy.TEACHINGSUGGESTIONSThequestionslistedabovesuggestasequenceofthreemainblocksforthecasepresentinganexampleofbestmanagementpractices-identifyingmanagementissuesrelatedtothesituationfacedbythecompanyatthemomentofthemeeting,currentbestpracticesofthecompanyandcenteredonthefutureofKidZania.Anotherteachingstrategymightbeginwith"GoorNoGo“decisionsregardingthevariousoptionsreflectingtheshiftinemphasistoexperientiallearning(adiscussioncenteredaroundthedevelopmentofcriteriabywhichtodecidewhichproposalsaremostattractive)andprogressingtoadiscussionofwhethertheoverallshiftinstrategyisappropriatefromacompetitiveandprofitstandpoint(e.g”selectionofanew“city”location;selectionofanewlearningactivity).Analternativeteachingstrategycouldusethelistofelementsinthecasethatillustrategoodservicemanagementpractices,inparticular,regardingbasicandintegrativeelementsofthestrategicservicebusinessvision.Adiscussionoftheseissueswouldallowstudentstobuildthegoodpracticeslistandcouldalsobesupplementedbyusingspecificquestionssuchas:"Howdothesepracticesrelatetosomeotherthatwehavestudiedinthecourse?”WhatdoyouthinkarethemainchallengesbeingfacedregardingthechangesintheserviceconceptofKidZania?Whicharetheimplicationsofthesechangesforexisting/newtargetmarketsegments(families,industrypartners,schools,countryinvestors,governmentsetc.)?Whicharethemaindifficultiesandlimitationsintheoperatingstrategiesregardingtheimplementationofexperientiallearni