CH 06new Service Development

New Service Development
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
 Ideas can come from
1. Customers
2. Employees listening to customer concerns
3. Mining Customer database
4. Trends in customer demographics
 Form the input to the development stage of

New Service Development cycle
 Development and Analysis ->Planning phase
 Design and launch -> Execution phase
 Final service product is shown to consider

people, systems and technology dimensions
 Technology advances often form the basis for

radical service innovation.
Service Design Elements
 Structural
1. Delivery System. Front and Back office,
automation, customer participation.
2. Facility Design. Size, aesthetics, layout
3. Location, customer demographics, single or
multiple sites, competition, site
characteristics.
4. Capacity Planning. Managing queues,
number of servers, accommodating average
or peak demand
Service Design Elements
 Managerial
1. Service encounter. Service culture, motivation,
selection and training, employee empowerment.
2. Quality. Measurement, monitoring, methods
expectations vs perceptions, service guarantee.
3. Managing capacity and demand. Strategies for
altering demand and controlling supply, queue
management.
4. Information. Competitive resource, data collection.
Cycle
• Full-scale launch
• Post-launch review
Full Launch Enablers Development

• Formulation
l
nt e n a
Co i za t i o of new services
objective / strategy
People
xt
Te
• Idea generation
• Service design
n
am
ga
and screening
and testing
s
Or
• Concept
• Process and system
development and
design and testing Product
• Marketing program testing
design and testing
• Personnel training Technology Systems
• Service testing and
pilot run
• Test marketing Tools
Design Analysis
• Business analysis
• Project authorization
Service Blueprinting
 When a building is designed, the design is captured
on architectural drawings called blue prints, as the
reproduction is done on special paper creating blue
lines.
 These blueprints show what the product should look
like and all the specifications needed for its
manufacture.
 G Lynn Shostack proposed that a service delivery
system also can be captured in a visual diagram (a
service blueprint) and used in a similar manner for
the design of services.
 It is a map or flowchart of all the transactions
constituting the service delivery process.
Service Blueprint for Coffee Shop
Take Collect Make Deliver

Order Payment Drink Drink
Materials
Fail Point (coffee, flavours,
milk, cups etc)
Line of visibility
Prepare Order
Mixes Supplies
Not seen by customer

Service Blueprint of Luxury Hotel
Service Blueprint
 All key activities are identified
 Linking the activities
 Full description of the service encounter
 Prepare a blueprint
 Design Service Standards

 Identify fail points
 Identify excessive wait points
Service Blueprint
 Precise definition of the service delivery
system that allows management to test the
service concept on paper before any final
commitments are made.
 It also facilitates problem solving and
creative thinking by identifying potential
points of failure and highlighting
opportunities to enhance customers’
perception of the service.
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 positioning (Financial Services)
Complexity
High
Investment Banking
Discount Brokerage
Financial Planner
Divergence
Low High
(Customized)
(Standardized) Real Estate
Life Insurance
Low
Structural Alternatives for a Restaurant
LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE
No Reservations TAKE RESERVATION Specific Table Selection

Self-seating. Menu on Blackboard SEAT GUESTS, GIVE MENUS Recite Menu: Describe Entrees & Specials
Eliminate SERVE WATER AND BREAD Assortment of Hot Breads and Hors D’oeuvres
Customer Fills Out Form TAKE ORDERS At table. Taken Personally by Maltre d’
PREPARE ORDERS
Pre-prepared: No Choice Salad (4 choices) Individually Prepared at table
Limit to Four Choices Entree (15 choices) Expand to 20 Choices: Add Flaming Dishes;
Bone Fish at Table; Prepare Sauces at Table
Sundae Bar: Self-service Dessert (6 choices) Expand to 12 Choices
Coffee, Tea, Milk only Beverage (6 choices) Add Exotic Coffees; Sherbet between
Serve Salad & Entree Together: SERVE ORDERS Courses; Hand Grind Pepper
Bill and Beverage Together
Cash only: Pay when Leaving COLLECT PAYMENT Choice of Payment. Including House Accounts:
Serve Mints
Service Process Design
 Degree of divergence – A standardized service with
low divergence is designed for high volumes with a
narrowly defined and focused service. Tasks are
routine and workforce requires low levels of skills.
 Object of the Service Process – If processing on
customer’s property (laundry), property must be
secured. Processing people involves physical
changes (haircut/surgical operation) or geographical
changes (bus ride). Due to high touch nature, the
workers must possess interpersonal as well as
technical skills and attention needs to be paid to the
service facility design and location as the customer is
physically present in the system. Processing
information can be front office or back office activity.
Service Process Design
 Type of customer contact
1. Physical presence and direct interaction
2. Indirect contact via electronic media from
the customer’s home or office.
3. Activities with no customer contact.
Direct contact can be through self service

and interaction with service workers.
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 information
Direct service) in a library
Customer Customer Food Giving a Providing Home Portrait Haircutting
Contact 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 System Design
 Production Line Approach
1. Limited discretionary action of Personnel
2. Division of Labour
3. Substitution of technology for People
4. Service Standardization
 Customer as Coproducer
1. Self-Service
2. Smoothing Service Demand
(Reservations/Appointments)
 Customer Contact Approach
1. Degree of customer contact
2. Separation of High and Low contact Operations
Customer Value
 Results produced + Process Quality
-------------------------------------------------------------------------
Price to the customer + Cost of acquiring the service
Thank You

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New Service Development

Levels of Service Innovation

 Power/energy - International flights with jet

 Form the input to the development stage of

 Final service product is shown to consider

 Technology advances often form the basis for

Full Launch Enablers Development

Take Collect Make Deliver

Not seen by customer

 Design Service Standards

 Degree of Complexity: Measured by the

LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE

No Reservations TAKE RESERVATION Specific Table Selection

Pre-prepared: No Choice Salad (4 choices) Individually Prepared at table

Direct contact can be through self service

No Operating Withdrawing Operating Sampling Documenting Driving a

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