New Service Development and Process Design

Customer Benefit Package

Hierarchy Level

Element Core Good Example

Core Service Example

Category Business Custom clothier

Business hotel 

First Core Business suits

Room for the night 

Second PeripheralGood

Garment bag

Bath robe 

  Peripheral Service 

Deferred payment plans

In house restaurant

Third Variant Coffee lounge

Airport shuttle 

 

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.

Levels of Service InnovationRadical 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

New Service Development Cycle

People

Technology Systems

Product

Full Launch Development

Design Analysis

Org

aniz

atio

nal

Con

text Team

s

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

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

Classification of Service Automation

Fixed-sequence (F) - parking lot gate Variable-sequence (V) - ATM Playback (P) - answering machine Numerical controlled (N) - animation Intelligent (I) - autopilot Expert system (E) - medical diagnosis Totally automated system (T) - EFT

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

Example of Service Blueprinting

Brushshoes

Applypolish

Failpoint

BuffCollect

payment

Cleanshoes Materials

(e.g., polish, cloth)

Select andpurchasesupplies

Standardexecution time

2 minutes

Total acceptableexecution time

5 minutes

30secs

30secs

45secs

15secs

Wrongcolor wax

Seen bycustomer 45

secs

Line ofvisibility

Not seen bycustomer butnecessary toperformance

Service Blueprinting (Bank Lending Operation Example)

Loan application Branch Officer Pay book

30min--1hr.

Line of visibility

Deny

1 day 2 days 3 days

Fail point Customer wait Employee decision

===========

===== $ 0 $ ==== =====

Receive Payment

Final paymentDecline Notify

customerIssuecheck

Confirm

Creditcheck

AcceptPrint

paymentbook

DelinquentClose

account

Verifyincome

dataInitial

screening

Verifypayer

Employer Creditbureau Branch

recordsBank

accountsAccounting

Data baserecords

FW

Con

firm

ww

F

F

F

F

F

F

Service Blueprint of Luxury Hotel

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 Reservations

Self-seating. Menu on BlackboardEliminate

Customer 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

Structural Positioning of Healthcare Services

HIGH COMPLEXITY

* Hospitals Services

* General Practitioner:

* Forensic-Testing Lab Diagnosis & Treatment

* Diagnostic services only

Specialist:

* Treatment only

LOW DIVERGENCE HIGH DIVERGENCE

Outpatient Clinic: Limited

* Treatment: e.g. Broken

Bones/Minor Burns only

* Retailer of

Orthopedic Supplies

* X-Ray Lab * Medical

Counseling

LOW COMPLEXITY

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 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

Production-line Approach to Service Design

Limit Discretion of Personnel

Division of Labor

Substitute Technology for People

Standardize the Service

Customer Participation

Encourage Co-production by CustomerFree air miles for Internet ticketing

Promote Demand Smoothing Half-price drinks before 6:00pm

Customer Contact View of Services

Degree of Customer Contact Influences Potential Efficiency of Service

Separate High- and Low-Contact Operations

Consider Sales Opportunity and Production Efficiency Tradeoff

Service-System Design Matrix

Mail contact

Face-to-faceloose specs

Face-to-facetight specs

PhoneContact

Face-to-facetotal

customization

Buffered core (none)

Permeable system (some)

Reactivesystem (much)

High

LowHigh

Low

Degree of customer/server contact

Internet & on-site

technology

SalesOpportunity

ProductionEfficiency

Information Empowerment

EmployeesRelational Databases

CustomersInternet Web Site

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.

INTERACTIVE CLASS EXERCISE

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