Ch 4 New Service Development 1 Learning

Ch. 4 New Service Development 1

Learning Objectives 1. Innovation in services 2. New service development process 3. Service Design Elements 4. Strategic positioning 5. Service blueprinting 6. Generic approaches to service system design 2

1. Innovation in Services Basic Research: Pursue a planned search for new knowledge regardless of possible application. Applied Research: Apply existing knowledge to problems in creation of new service. Development: Apply knowledge to problems to improve a current service. R&D! 3

1. Challenges for Service Innovation Ability to protect intellectual and property (IP) technologies. Incremental nature of innovation. Degree of integration required. Ability to build prototypes or conduct tests in a controlled environment. 4

2. New Service Development Cycle • Full-scale launch • Post-launch review Full Launch ga n Co izatio nte na l xt Or s am Design People Te • Service design and testing • Process and system design and testing • Marketing program design and testing • Personnel training • Service testing and pilot run • Test marketing Development Enablers Product Technology • Formulation of new services objective / strategy • Idea generation and screening • Concept development and testing Systems Tools Analysis • Business analysis • Project authorization 5

2. Levels of Service Innovation (1) Radical Innovations Major Innovation Start-up Business New Services for the Market Presently served (2) Incremental Innovations Service Line Extensions Service Improvements Style Changes e. g. Fed. Ex 6

2. 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 e. g. Amazon. com 7

3. Service Design Elements (1) Structural: Delivery system (front & back office) Facility design (aesthetics, layout) Location (competition, site characteristics) Capacity planning (number of servers) (2) Managerial Service encounter (culture, empowerment) Quality (measurement, guarantee) Managing capacity and demand (queues) Information (data collection, resource) e. g. Shouldice Hospital 8

3. Customer Value Equation V = (R + PQ) / (P + C) R: Results PQ: Process Quality P: Price C: Costs 9

4. Strategic Positioning Through Process Structure Degree of Complexity: Measured by the number of steps in the service blueprint. e. g. clinic VS general hospital. Degree of Divergence: Amount of discretion permitted the server to customize the service. e. g. attorney VS paralegal. 10

4. Lower/Higher Complexity/Divergence LOWER CURRENT PROCESS HIGHER No Reservations Self-seating. Menu on TAKE RESERVATION SEAT GUESTS, GIVE MENUS Specific Table Selection Recite Menu: Describe Blackboard SERVE WATER AND BREAD Assortment of Hot Breads and Hors D’oeuvres At table. Taken Personally by Maltre d’ Customer Fills Out Form TAKE ORDERS Pre-prepared: No Choice Salad (4 choices) Limit to Four Choices Sundae Bar: Self-service Coffee, Tea, Milk only Entree (15 choices) Dessert (6 choices) Beverage (6 choices) Serve Together Cash only Individually Prepared at table Expand to 20 Choices: Expand to 12 Choices Add Exotic Coffees SERVE ORDERS Separate-Courses COLLECT PAYMENT Choice of Payment 11

5. Service Blueprint of Luxury Hotel 12

6. Generic Approaches to Service Design Production-line • Limit Discretion of Personnel • 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 13

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? Give an example of a service in which isolation of the technical core would be inappropriate. 14

INTERACTIVE CLASS EXERCISE The class breaks into small groups and prepares a service blueprint for bus carrier, courier service et al. Go to http: //www. oecd. org/home and find the current non-manufacturing share of total business R&D for the countries listed in Table 1. 1. Are there any surprises? 15