Service DesignService DesignService DesignService Design

New Service Development ProcessTechnology in Services

Learning Objectives

1. New service development process2. Preparing a Service Blueprint3. Dimensions of divergence and complexity

in a service process4. Taxonomy of service processes to classify a

service operation5. Generic approaches to service system

design

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Principles of Service Design1. Know your customers2. Determine which customer

need will be fulfilled3. Develop service strategy,

position the service4. Design the service, HR

requirements and tangibles5. Design the process from

users perspective6. Minimize hand-offs

7. Design backroom operations8. Incorporate data collection in

process design9. Determine extent of customer

contact and participation10. Build flexibility and

robustness in the system11. Design employee and

customer loyalty program in the system

12. Continuous monitoring & improvement

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Issues in Designing a Service System

1. Location2. Facility design, layout for effective customer &

employee workflow3. Processes & job definitions for the provided

services4. Key performance indices , quality measures5. Extent of customer involvement6. Adequate service capacity7. Equipment selection 8. Trade-off between cost & quality of service

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New Service Development - 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

Technological advances often are the basis for radical service innovation.

Illustrations of Technology-drive innovations are:

Power/energy - International flights with jet aircraft Physical design - Enclosed sports stadiums Materials - Astroturf Methods - JIT and TQM Information - E-commerce using the Internet 4-6

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

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People

Technology Systems

Product

Full Launch Development

Design Analysis

Org

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atio

nal

Con

text Team

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Tools

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

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

Service Design ElementsStructural

1. Delivery System (Front and back Office)

2. Facility Layout (Size, layout, etc)

3. Location (Single, Multiple sites, etc.)

4. Capacity Planning (Managing queues, number of servers, average or peak demand, etc.)

Managerial

1. Service encounter (Culture, selection and training, employee empowerment, etc)

2. Quality (Measurement, Monitoring, expectations vs. perceptions, etc.)

3. Managing Capacity and demand (Strategies for altering demand and controlling supply, etc)

4. Information (Competitive Resource, Data Collection)

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Service Blueprint of Luxury Hotel

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Chapter 5 - New Service Development 9

Service System Design Tools

Line of Visibility

Take Drink Order

Collect Payment

Deliver DrinkMake Drink

Order Supplies

Prepare Mixes

Materials(Coffee, flavors, milk, cups, etc.)

Fail Point

Not seen by customer

Seen by customer

Service Blueprint for Espresso and Coffee Shop

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.

Additional concepts in Service Design

• Service Roles – Clear, unambiguous part to play

• Service Script - Learned sequence of behaviors expected from service personnel and customers

• Service Theatre – (Lovelock)• Identification of fail points• Setting Service Standards

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Strategic Positioning Through Process Structure

1. Degree of Complexity: Measured by the number of steps in the service blueprint. For example a clinic is less complex than a general hospital.

2. 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.

These two dimensions are used to create the market-positioning chart. 4-14

Complexity & Divergence based Structural Positioning (Financial Services)

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Divergence low - Standardized

Divergence High - Customized

Complexity - High

Complexity - Low

Structural Alternatives for a Restaurant

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LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE

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

Taxonomy of Service Processes Low divergence

(standardized service) High divergence

(customized service)

Processing of

goods Processing Information

Processing of people

Processing of goods

Processing Information

Processing of people

No Customer Contact

Dry Cleaning Check processing

Auto repair Computer programming

Restocking a vending machine

Billing for a credit card

Tailoring a suit Designing a building

Indirect Customer Contact

Ordering groceries from a home computer

Supervision of a landing by an air controller

Direct Customer Contact

No customer service worker interaction(self- service)

Operating a vending machine

Withdrawing cash from an ATM

Operating an elevator

Sampling food at a buffet dinner

Documenting medical history

Driving a rental car

Assembling premade furniture

Riding an escalator

Bagging of groceries

Searching for information in a library

Using a health club facility

Customer service worker interaction

Food service in a restaurant

Giving a lecture Handling routine bank transactions

Providing public transportation

Home carpet cleaning

Portrait painting

Haircutting

Hand car washing

Providing mass vaccination

Landscaping service

Counseling 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• 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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erviceuiringtheSCostsofAcqice

tyocessQualioducedsultsValue

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Questions?

What did we learn?

INTERACTIVE CLASS EXERCISE

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

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