New Service Development Learning Objectives u Discuss

New Service Development

Learning Objectives u Discuss the new service development process. u Prepare a blueprint for a service operation. u Describe a service process using the dimensions of divergence and complexity. u Use the taxonomy of service processes to classify a service operation. u Compare and contrast the generic approaches to service system design.

Levels of Service Innovation Radical Innovations u u u 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 u u u 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 u Power/energy - International flights with jet aircraft u Physical design - Enclosed sports stadiums u Materials - Astroturf u Methods - JIT and TQM u Information - E-commerce using the Internet

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

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

Service Blueprint of Luxury Hotel

Strategic Positioning Through Process Structure u Degree of Complexity: Measured by the number of steps in the service blueprint. For example a clinic is less complex than a general hospital. u 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 LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS No Reservations Self-seating. Menu on Blackboard Eliminate Customer Fills Out Form TAKE RESERVATION SEAT GUESTS, GIVE MENUS SERVE WATER AND BREAD TAKE ORDERS PREPARE ORDERS Pre-prepared: No Choice Salad (4 choices) Limit to Four Choices Entree (15 choices) Sundae Bar: Self-service Dessert (6 choices) Coffee, Tea, Milk only Serve Salad & Entree Together: Bill and Beverage Together Cash only: Pay when Leaving Beverage (6 choices) SERVE ORDERS COLLECT PAYMENT HIGHER COMPLEXITY/DIVERGENCE Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors D’oeuvres 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

Taxonomy of Service Processes Low divergence (standardized service) Processing of goods Information Dry Check Cleaning processing Restocking Billing for a a vending credit card machine Ordering groceries from a home computer No Customer Contact Indirect customer contact Direct Customer Contact No customerservice worker interaction (selfservice) Customer service worker interaction Operating a vending machine Assembling premade furniture Food service in a restaurant Hand car washing Withdrawing cash from an ATM Giving a lecture Handling routine bank transactions Processing of people High divergence (customized service) Processing of goods Information Auto repair Computer Tailoring a programming suit Designing a building Processing of people Supervision of a landing by an air controller Operating Sampling Documenting an elevator food at a medical Riding an buffet dinner history escalator Bagging of groceries Searching for information in a library Providing Home Portrait public carpet painting transportcleaning Counseling a tion Landscaping Providing service mass vaccination Driving a rental car Using a health club facility Haircutting Performing a surgical operation

Generic Approaches to Service Design u u 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

Customer Value Equation

Discussion Questions u What are the limits in the production-line approach to service? u Give an example of a service in which isolation of the technical core would be inappropriate. u What are some drawbacks of customer participation in the service delivery process? u What ethical issues are raised in the promotion of sales during a service transaction?

100 Yen Sushi House 1. 2. 3. 4. 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 Dishwashing Counter in Back CONVERSATION AREA Miso and Tea Station CONVEYOR BELT CONVERSATION AREA TAKE-OUT POSITION ENTRANCE = CHEF

Commuter Cleaning - New Venture Proposal 1. 2. 3. 4. Prepare a service blueprint for Commuter Cleaning. What generic approach to service design is illustrated by Commuter Cleaning, and what competitive advantage does this offer? 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. Critique the business concept, and make recommendations for improvement.

Golfsmith 1. 2. 3. Prepare a service blueprint for Golfsmith. What generic approach to service design does Golfsmith illustrate and what competitive advantages does this design offer? Why is Golfsmith a good candidate for Internet sales?

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