New Service Development and Process Design

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.• Place an example of service automation in it proper

category.• Discuss the managerial issues associated with the adoption

of new technology.

New Service Development Cycle

• 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

Full Launch Development

Design Analysis

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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

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

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

Adoption of New Technology in Services

• Challenges of Adopting New TechnologyThe Process is the ProductBack Office vs Front Office ChangesNeed for Standardization

• Managing the New Technology Adoption Process

Ten step process with concern for employees and customers

Service Blueprint of Luxury Hotel

Blending Blueprinting with LeanWomack and Jones, “Lean Consumption”, HBR March 2005.

• Principles of Lean Consumption:1. Solve the customer’s problem completely by ensuring that all the

goods and services work, and work together– Home: search, find, purchase, maintain, repair, upgrade– Cell phone: calling, pda, pictures, music, hot synch., downloads, internet…

2. Don’t waste the customer’s time– Enhanced blueprint: add value-creating, and wasted time for customer and

provider. Calculate total time and % value added.3. Provide exactly what the customer wants

– Prevent stockouts from long supply chains– Nike’s custom bags from NuSewCo in San Francisco

4. Provide what’s wanted exactly where it’s wanted– Offer services through all desired channels, on-line, local, big-box,

phone…5. Provide what’s wanted where it’s wanted exactly when it’s wanted

– Sometimes this may be some time off. Could I get it customized merely by sharing plans?

6. Continually aggregate solutions to reduce the customer’s time and hassle.– One stop for the really big problems: mobility, communications, shelter,

health care, financial management, shopping.

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 ReservationsSelf-seating. Menu on Blackboard

EliminateCustomer 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 ProcessesDegree of Customer Contact

Low Divergence (Standardized Service) High Divergence (Customized Service)

Processing of Goods

Processing of Information or Images

Processing of People

Processing of Goods

Processing of Information or Images

Processing of People

No Customer Contact Dry cleaning

Restocking a vending machine

Check processing

Billing for a credit card

Auto repair

Tailoring a suit

Computer programming

Designing a building

Indirect Customer Contact Ordering groceries from a home computer

Phone-based account balance verification

Supervision of a landing by an air controller

Bidding at a TV auction

Direct Customer Contact

No customer-service worker interaction (self-service)

Operating a vending machine

Assembling pre-made furniture

Withdrawing cash from an automatic bank teller

Taking pictures in a photo booth

Operating an elevator

Riding an escalator

Sampling food at a buffet dinner

Bagging of groceries

Documenting medical history at a clinic

Searching for information in a library

Driving a rental car

Using a health club facility

Customer-service worker interaction

Food serving in a restaurant

Car washing

Giving a lecture

Handling routine bank transactions

Providing public transportation

Providing mass vaccination

Home carpet cleaning

Landscaping service

Portrait painting

Counseling

Haircutting

Performing a surgical operation

Generic Approaches to Service Design

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

• Customer as Coproducer• Substitution of Customer Labor for Provider• Smoothing Service Demand

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

• Information Empowerment• Employee and Customer

Discussion Questions

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

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

• 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.

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.

100 Yen Sushi House Questions

• Prepare a service blueprint for the 100 Yen Sushi House

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

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

• 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

100 Yen Sushi House Service Package

• Supporting Facility

• Facilitating Goods

• Information

• Explicit Service

• Implicit Service

INTERACTIVE CLASS EXERCISE

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