The fact that superior service ca n generate a competitive advantage for a company does not mean that every attempt at improving service will create such an advantage. Investments in service, like those in production and distribution, must be balanced against other types of investments on the basis of direct, tangible benefits such as cost reduction and increased revenues. If a company is already effectively on a par with its competitors because it provides service that avoids a damaging reputation and keeps customers from leaving at an unacceptable rate, then investment in higher service levels may be wasted, since service is a deciding factor for customers only in extreme situations.

This truth was not apparent to managers of one regional bank, which failed to improve its competitive position despite its investment in reducing the time a customer had to. wait for a teller, The bank managers did not recognize the level of customer inertia in the consumer banking industry that arises from the inconvenience of switching banks. Nor did they analyze their service improvement to determine whether it would attract new customers by producing a new standard of service that would excite customers or by proving difficult for competitors to copy. The only merit of the improvement was that it could easily be described to customers.

Line	In 1971 researchers hoping to predict earthquakes in
	the short term by identifying precursory phenomena
	(those that occur a few days before large quakes
	but not otherwise) turned their attention to changes
(5)	in seismic waves that had been detected prior to
	earthquakes. An explanation for such changes was
	offered by “dilatancy theory,” based on a well-known
	phenomenon observed in rocks in the laboratory:
	as stress builds, microfractures in rock close,
(10)	decreasing the rock’s volume. But as stress
	continues to increase, the rock begins to crack and
	expand in volume, allowing groundwater to seep in,
	weakening the rock. According to this theory, such
	effects could lead to several precursory phenomena in
(15)	the field, including a change in the velocity of seismic
	waves, and an increase in small, nearby tremors.
	Researchers initially reported success in identifying
	these possible precursors, but subsequent analyses
	of their data proved disheartening. Seismic waves
(20)	with unusual velocities were recorded before some
	earthquakes, but while the historical record confirms
	that most large earthquakes are preceded by minor
	tremors, these foreshocks indicate nothing about
	the magnitude of an impending quake and are
(25)	indistinguishable from other minor tremors that occur
	without large earthquakes.
	In the 1980s, some researchers turned their
	efforts from short-term to long-term prediction.
	Noting that earthquakes tend to occur repeatedly in
(30)	certain regions, Lindh and Baker attempted to identify
	patterns of recurrence, or earthquake cycles, on which
	to base predictions. In a study of earthquake-prone
	sites along the San Andreas Fault, they determined
	that quakes occurred at intervals of approximately 22
(35)	years near one site and concluded that there was a
	95 percent probability of an earthquake in that area
	by 1992. The earthquake did not occur within the time
	frame predicted, however.
	Evidence against the kind of regular
(40)	earthquake cycles that Lindh and Baker tried
	to establish has come from a relatively new
	field, paleoseismology. Paleoseismologists
	have unearthed and dated geological features
	such as fault scarps that were caused by
(45)	earthquakes thousands of years ago. They have
	determined that the average interval between ten
	earthquakes that took place at one site along the
	San Andreas Fault in the past two millennia was
	132 years, but individual intervals ranged greatly,
(50)	from 44 to 332 years.

The United States hospital industry is an unusual market in that nonprofit and for-profit producers exist simultaneously. Theoretical literature offers conflicting views on whether nonprofit hospitals are less financially efficient. Theory suggests that nonprofit hospitals are so much more interested in offering high-quality service than in making money that they frequently input more resources to provide the same output of service as for-profit hospitals. This priority might also often lead them to be less vigilant in streamlining their services--eliminating duplication between departments, for instance. Conversely, while profit motive is thought to encourage for-profit hospitals to attain efficient production, most theorists admit that obstacles to that efficiency remain. For-profit hospital managers, for example, generally work independently of hospital owners and thus may not always make maximum financial efficiency their highest priority. The literature also suggests that widespread adoption of third-party payment systems may eventually eliminate any such potential differences between the two kinds of hospitals.

The same literature offers similarly conflicting views of the efficiency of nonprofit hospitals from a social welfare perspective. Newhouse (1970) contends that nonprofit hospital managers unnecessarily expand the quality and quantity of hospital care beyond the actual needs of the community, while Weisbrod (1975) argues that nonprofit firms--hospitals included--contribute efficiently to community welfare by providing public services that might be inadequately provided by government alone.