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, eg. E-ticketing, ATMs

Start-up Business: new service for existing market, eg. Internet Book shops

New Services for the Market Presently Served: new services to customers of an organization, e-

ticketing, e-hotel booking

Incremental Innovations Service Line Extensions: augmentation of existing service

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

offered service, eg. Introducing shampooing of hair before cutting, introducing electric shavers

Style Changes: modest visible changes in appearances (changing interior paints and keeping potted plants)

Technology Driven Service Innovation

Power/energy - International flights with jet aircraft, solar and wind energy farms

Physical design - Enclosed sports stadiums, maglev trains speeding up inter-city travel

Materials - Astroturf , teflon-tough, heat resistant sealant developed by DuPont

Methods - JIT and TQM Information - E-commerce using the Internet,

Internet as a means of communication.

Service Design Elements Structural

- Delivery system – front and back office, automation, customer participation

- Facility design – size, aesthetics, layout- Location – customer demography, single or multiple sites,

competition, site characteristics- Capacity planning – managing queues, servers, managing

average and peak demand Managerial

- Service encounter – service culture, motivation, selection training, employe empowerment

- Quality – measurement, monitoring methods, expectations vs perceptions, service guarantee

- Managing capacity and demand – strategies for managing demand, queue management

- Information – competitive resource, data collection Discuss how each of the above service design elements have

been incorporated in the case of Ramakrishna Hospital in Elec city Phase I.

• Structural Elements

– Delivery system : front office is comfortable, well kept, pleasing staff, well mannered

– Facility Design : Not so big, yet functional for the small working population, IT staff and families, one floor, private rooms, shared rooms, in-house pharmacy

– Location : Heart of Electronic City, proximity to bus-stand and messing facilities

– Capacity Planning : 2 consultation rooms, waiting space for ten people, car parking area

• Managerial Elements

– Service Encounter : Employees serve with a smile, trained nurses

– Quality : No feedback system to evaluate service quality, good housekeeping, security

– Managing Capacity and Demand :

• Pricing caters to middle class segment, helps control demand

• diff specialists visit during diff times, spread out the existing demand

• group plans + discounts for students, detection and health check-up camps

• RMO looks after emergencies and less complicated cases

– Information : Maintains database of patients and medical history, easy to trace back ailments of patients, computerisation helps easy disposal of patients and settlement of bills.

New Service Development Cycle

People

Technology Systems

Product

Full Launch Development

Design Analysis

Org

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Con

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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

What is a Service Blueprint ?

Just like buildings require architectural drawings called blueprints which show what the final building will look like and the specs needed for its construction, service delivery systems also require roadmaps , tangible visual documents which show where and how customers and companies interact.

Elements of a Service Blueprint

Customer actions : all the steps customers take as part of the service delivery process

onstage/visible contact employee actions : the actions of the frontline contact employees that occur as part of the face-to-face encounter with customers.

backstage/invisible contact employee actions : non-visible interactions with customers in order to prepare to serve the customer or part of roe responsibilities.

Support processes : all acitivities caried out by employees who are not contact employees but whose actions are crucial.

Physical evidence : represents all the tangibles that the customers are exposed to or collect during their contact with the company.

Service Blueprint of a medical clinic

Customer actions : – visiting the premises early / telephoning for

appointment– Reporting to the clerk / nurse at counter– Getting seated– Bringing earlier prescriptions/ history

Onstage visible contact employee actions :– Noting details and issuing slip– Do a weight check– Do a blood pressure checkup– Offer newspapers and magazines to read

Backstage invisible contact employee actions– Sterilising surgical equipments– Making beds– arranging illumination in consulting room– Arranging enough privacy for patients

Support Processes– Housekeeping / sanitation / proper sewage

systems– Buying medicines / equipments / – Paying bills, rent etc..

Physical evidence– Waiting room décor / wall hangings / medical

advices / seating / personal comforts / conveniences

– Newspapers / magazines to while away time during waiting

– Consulting room decor / ambience / space / consulting tables

Service Blueprint ComponentsPhysical Evidence

Customer Actions

----------------------Line of interaction--------------------

Onstage visible contact employee action

------------------------Line of visibility-------------------------

Backstage Invisible contact employee actions

----------------------Line of internal interaction----------------------

Support Processes

Preparing service blueprints – group activity Divide yourself into four groups and discuss on the service

blueprint for each of the following service delivery systems.

List clearly

– the customer actions /

– onstage visible contact employee actions /

– backstage invisible contact employee actions /

– support processes and

– physical evidence. a. the bakery round the corner b. A hair cutting saloon near to XIME c. A beauty parlour near to XIME d. MacDonald's outlet in Forum Mall.

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 to 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 library

Customer 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 – well defined tasks with the

needed tools provided, customers value consistency in service performance

• Division of Labor – job broken into small tasks, specialisaton of skills possible.

• Substitute Technology for People – helps in improving efficiency of manufacturing, eg ATMs.

• Standardize the Service – improves speed and ensures uniform service quality

Customer as Co-producer• Self Service – an approach to reduce operating costs• Smoothing Service Demand – customers must choose time of service by appointments, reservations or waiting for service. Training the customer, for eg. to book air-ticket, take up a diagnostic role in tele-servicing

Generic Approaches on Service System Design (contd..)

Customer Contact• Degree of Customer Contact ( % age of time customer is in

system relative to total service time) High contact service: customer role is important, deciding the timing

of service, nature etc.. Low contact service: customers have no contact on the timing of the

service • Separation of High and Low Contact Operations, eg. BMTC,

Running the buses on time, differentiated from the maintenance operations on buses

Information Empowerment• Employee empowerment : use of computers and databases gave

enough flexibility to employes and (travel) agents to book customers on other comparable services (flights)

• Customer empowerment : use of internet to make customer more powerful. FedEx makes it possible for customer to track the

path of a parcel.

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

CO

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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.