New Service Development

1
New Service Development
2
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.

3
Levels of Service Innovation

• Radical 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

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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

5
Service Design Elements

• Structural- Delivery system- Facility design-
  Location- Capacity planning
• Managerial- Service encounter- Quality-
  Managing capacity and demand- Information

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New Service Development Cycle

• Full-scale launch
• Post-launch review

Full Launch
Development
Enablers

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

People
Organizational Context
Teams

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

Product
Technology
Systems
Tools
Analysis
Design

• Business analysis
• Project authorization

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Service Blueprint of Luxury Hotel
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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.

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Structural Alternatives for a Restaurant

TAKE RESERVATION SEAT GUESTS, GIVE MENUS SERVE
WATER AND BREAD TAKE ORDERS PREPARE ORDERS Salad
(4 choices) Entree (15 choices) Dessert (6
choices) Beverage (6 choices) SERVE
ORDERS COLLECT PAYMENT
LOWER COMPLEXITY/DIVERGENCE
CURRENT PROCESS HIGHER
COMPLEXITY/DIVERGENCE
No Reservations Self-seating. Menu on
Blackboard Eliminate Customer Fills Out
Form Pre-prepared No Choice Limit to Four
Choices Sundae Bar Self-service Coffee, Tea,
Milk only Serve Salad Entree Together Bill and
Beverage Together Cash only Pay when Leaving
Specific Table Selection Recite Menu Describe
Entrees Specials Assortment of Hot Breads and
Hors Doeuvres At table. Taken Personally by
Maltre d Individually Prepared at
table Expand to 20 Choices Add Flaming
Dishes Bone Fish at Table Prepare Sauces at
Table Expand to 12 Choices Add Exotic Coffees
Sherbet between Courses Hand Grind
Pepper Choice of Payment. Including House
Accounts Serve Mints
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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

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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

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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?

14
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.

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100 Yen Sushi House Layout

Dishwashing Counter in Back
CONVERSATION AREA
Miso and Tea Station
CONVEYOR BELT
CONVERSATION AREA
TAKE-OUT POSITION
ENTRANCE
CHEF
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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.

17
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?

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INTERACTIVE CLASS EXERCISE

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