New Service Development

Learning Objectives

Discuss the new service development process. Prepare a blueprint for a service operation. Describe a service process using the dimensions

of divergence and complexity. Use the taxonomy of service processes to classify

a service operation. Compare and contrast the generic approaches to

service system design.

Levels of Service InnovationRadical Innovations

Major Innovation: new service driven by information and computer based technology

Start-up Business: new service for existing market New Services for the Market Presently Served: new services to

customers of an organization

Incremental Innovations Service Line Extensions: augmentation of existing service line

(e.g. new menu items) Service Improvements: changes in features of currently offered

service Style Changes: modest visible changes in appearances

Technology Driven Service Innovation

Power/energy - International flights with jet aircraft

Physical design - Enclosed sports stadiums Materials - Astroturf Methods - JIT and TQM Information - E-commerce using the Internet

Service Design Elements

Structural- Delivery system- Facility design- Location- Capacity planning

Managerial- Service encounter- Quality- Managing capacity and demand- Information

New Service Development Cycle

People

Technology Systems

Product

Full Launch Development

Design Analysis

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Tools

Enablers

• Formulation of new services objective / strategy• Idea generation and screening• Concept development and testing

• Business analysis• Project authorization

• Full-scale launch• Post-launch review

• Service design and testing• Process and system design and testing• Marketing program design and testing• Personnel training• Service testing and pilot run• Test marketing

Service Blueprint of Luxury Hotel

Strategic Positioning Through Process Structure

Degree of Complexity: Measured by the number of steps in the service blueprint. For example a clinic is less complex than a general hospital.

Degree of Divergence: Amount of discretion permitted the server to customize the service. For example the activities of an attorney contrasted with those of a paralegal.

Structural Alternatives for a Restaurant

No Reservations

Self-seating. Menu on BlackboardEliminate

Customer Fills Out Form

Pre-prepared: No Choice

Limit to Four Choices

Sundae Bar: Self-service

Coffee, Tea, Milk onlyServe Salad & Entree Together:

Bill and Beverage Together

Cash only: Pay when Leaving

TAKE RESERVATIONSEAT GUESTS, GIVE MENUSSERVE WATER AND BREAD

TAKE ORDERSPREPARE ORDERS

Salad (4 choices)

Entree (15 choices)

Dessert (6 choices)

Beverage (6 choices)SERVE ORDERS

COLLECT PAYMENT

Specific Table SelectionRecite Menu: Describe Entrees & SpecialsAssortment of Hot Breads and Hors D’oeuvresAt table. Taken Personally by Maltre d’

Individually Prepared at table

Expand to 20 Choices: Add Flaming Dishes;Bone Fish at Table; Prepare Sauces at TableExpand to 12 Choices

Add Exotic Coffees; Sherbet betweenCourses; Hand Grind Pepper

Choice of Payment. Including House Accounts:Serve Mints

LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE

Taxonomy of Service Processes Low divergence High divergence (standardized service) (customized service) Processing Processing Processing Processing Processing Processing of goods Information of people of goods Information of people Dry Check Auto repair Computer No Cleaning processing Tailoring a programming Customer Restocking Billing for a suit Designing a Contact a vending credit card building machine Ordering Supervision Indirect groceries of a landing customer from a home by an air contact computer controller No Operating Withdrawing Operating Sampling Documenting Driving a customer- a vending cash from an elevator food at a medical rental car service machine an ATM Riding an buffet dinner history Using a worker Assembling escalator Bagging of health club interaction premade groceries Searching for facility (self- furniture informationDirect service) in a libraryCustomer Customer Food Giving a Providing Home Portrait HaircuttingContact service service in a lecture public carpet painting Performing worker restaurant Handling transport- cleaning Counseling a surgical interaction Hand car routine bank a tion Landscaping operation washing transactions Providing service mass vaccination

Generic Approaches to Service Design

Production-line• Limit Discretion of Personnel• Division of Labor• Substitute Technology for People• Standardize the Service

Customer as Coproducer• Self Service• Smoothing Service Demand

Customer Contact• Degree of Customer Contact• Separation of High and Low Contact Operations

Information Empowerment• Employee• Customer

Customer Value Equation

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Discussion Questions

What are the limits in the production-line approach to service?

Give an example of a service in which isolation of the technical core would be inappropriate.

What are some drawbacks of customer participation in the service delivery process?

What ethical issues are raised in the promotion of sales during a service transaction?

100 Yen Sushi House

1. Prepare a service blueprint for the 100 Yen Sushi House.

2. What features differentiate 100 Yen Sushi House and how do they create a competitive advantage?

3. How has the 100 Yen Sushi House incorporated the just-in-time system into its operations?

4. Suggest other services that could adopt the 100 Yen Sushi House service delivery concept.

100 Yen Sushi House Layout

Miso and Tea Station

CONVERSATION AREA

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Dishwashing Counter in Back

ENTRANCE

CONVEYOR BELT

TAKE-OUT POSITION

= CHEF

Commuter Cleaning - New Venture Proposal

1. Prepare a service blueprint for Commuter Cleaning.2. What generic approach to service design is

illustrated by Commuter Cleaning, and what competitive advantage does this offer?

3. Using the data in Table 4.6 calculate a break-even price per shirt if monthly demand is expected to be 20,000 shirts and the contract with a cleaning plant stipulates a charge of $0.50 per shirt.

4. Critique the business concept, and make recommendations for improvement.

Golfsmith

1. Prepare a service blueprint for Golfsmith.

2. What generic approach to service design does Golfsmith illustrate and what competitive advantages does this design offer?

3. Why is Golfsmith a good candidate for Internet sales?

INTERACTIVE CLASS EXERCISE

The class breaks into small groups and prepares a service blueprint for Village Volvo.