New Service Development and Process Design

Levels of Service InnovationLevels of Service InnovationRadical InnovationsRadical 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 InnovationsIncremental 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 InnovationTechnology 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

New Service Development CycleNew Service Development Cycle

• 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

People

Technology Systems

Product

Orga

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tiona

lCo

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Tools

EnablersDevelopmentFull Launch

Design Analysis

The Service PackageSupporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane.Facilitating Goods: The material purchased or consumed by the buyer or items provided by the consumer. Examples are food items, auto parts, legal documents, golf clubs.Information: Data of information that is provided by the customer to enable efficient and customized service. Examples patient medical records, customer preferences from prior visit.Explicit Services: Benefits readily observable by the senses. The essential or intrinsic features. Examples are quality of meal, attitude of the waiter, on-time departure.Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only vaguely. Examples are privacy of loan office, security of a well lighted parking lot.

Service DesignService Design

Design SpecificationsDesign SpecificationsDesign SpecificationsDesign Specifications

Delivery SpecificationsDelivery SpecificationsDelivery SpecificationsDelivery Specifications

Performance SpecificationsPerformance SpecificationsPerformance SpecificationsPerformance Specifications

Serv

ice

Des

ign

Serv

ice

Des

ign

Serv

ice

Des

ign

Serv

ice

Des

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Service System Design ToolsService System Design Tools

• Service Blueprinting– Design tool based on the process flow

diagram• Delineate front office from back office

operations• Determine standard or maximum execution

times, materials and the exact process for each step

• Identify potential failure points and generate mitigation plans to prevent or recover from a failure

Service Blueprint ComponentsService Blueprint Components

DriverPicks

Up Pkg.

DispatchDriver

AirportReceives& Loads

SortPackages

Load onAirplane

Fly toDestination

Unload&

Sort

LoadOn

Truck

Express Mail Delivery ServiceExpress Mail Delivery ServiceS

UP

PO

RT

PR

OC

ES

SC

ON

TA

CT

PER

SO

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ack S

tag

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(On

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CU

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P

HY

SIC

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CustomerCalls

CustomerGives

Package

TruckPackagingFormsHand-held ComputerUniform

ReceivePackage

TruckPackagingFormsHand-held ComputerUniform

DeliverPackage

CustomerServiceOrder

Fly toSort

Center

Line of InteractionLine of Interaction

Line of VisibilityLine of Visibility

Line of Internal InteractionLine of Internal Interaction

Overnight Hotel StayOvernight Hotel Stay

HotelExteriorParking

Cart for BagsUniform

DeskRegistrationPapersLobbyKey

ElevatorsHallwaysRoom

Cart for Bags

RoomAmenitiesBath

Menu DeliveryTrayFoodAppearance

FoodBillDeskLobbyHotelExteriorParking

Arriveat

Hotel

Give Bagsto

BellpersonCheck in Go to

RoomReceive

BagsSleep

Shower

CallRoom

ServiceReceive

FoodEat

Check outand

Leave

Greet andTakeBags

ProcessRegistration

DeliverBags

DeliverFood

ProcessCheck Out

Take Bagsto Room

TakeFoodOrder

RegistrationSystem

PrepareFood

RegistrationSystem

SUPP

OR

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OC

ESS

CO

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PER

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(Bac

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(On

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CU

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• 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

Generic Approaches to Service DesignGeneric Approaches to Service Design

Strategic Positioning Through Process Structure

Degree of ComplexityDegree 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 DivergenceDegree 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.

Steel productionAutomobile fabrication

House buildingRoad construction

DressmakingFarming

Auto RepairAppliance repair

Maid ServiceManual car wash

TeachingLawn mowing

Low service contentHigh goods content

High service contentLow goods content

Increasinggoods content

Increasingservice content

Goods-service spectrum

Taxonomy of Service ProcessesTaxonomy of Service Processes

Processing of goods

Processing Information

Processing of people

Processing of goods

Processing Information

Processing of people

Restocking a vending machine

Billing for a credit card

Tailoring a suitDesigning a building

Assembling premade furniture

Giving a lecture

Riding an escalator

Bagging of groceries

Searching for information in a library

Using a health club facility

Hand car washing

Providing mass vaccination

Landscaping service

CounselingPerforming a surgical operation

Providing public transportation

Home carpet cleaning

Portrait painting Haircutting

Operating an elevator

Sampling food at a buffet dinner

Documenting medical history

Driving a rental car

Direct Customer Contact

Operating a vending machine

Withdrawing cash from an ATM

Food service in a restaurant

Handling routine bank transactions

Customer service worker interaction

No customer service worker interaction(self- service)

Contact

Ordering groceries from a home computer

Computer programming

Indirect

CustomerSupervision of a landing by an air controller

Dry CleaningCheck processing

Auto repairNoCustomerContact

Low divergence(standardized service)

High divergence(customized service)

A Well-designed Service System Is

Consistent with firm’s strategic focusUser friendlyRobustEasy to sustainEffectively linked between front & back officeCost effectiveVisible to customer

Risk Management in New Product Risk Management in New Product DevelopmentDevelopment

Why research and analysis before new

product development

New product development is linked with very limited historical or preliminary data. Hence, risky

Risk can be in form of market, technical, or organizational issues. Risk analysis solves the problem through flexible modeling, primary and secondary research.

A good strategy is a must for evaluating and dealing with the associated and unavoidable risks.

Research conducted to understand customer needs and develop a new product is different from research required to launch a new product.

Product development research is focused on needs of customers while launch research focuses on understanding the motivation and attitudes of early adopters. Successful targeting of early adopters builds the fountain for new product success.

New product have a very high failure rates.

Products fail, not because of technical shortcomings, but due to absence of market.

Over 60% of new product fail before entering the market, and out of the remaining 40% that do see the ray of light, 40% fail to yield profit and are withdrawn from the market.

Timely and reliable knowledge about customer preferences is most important. Such data is obtained from business research.