New Service Development
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.
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
Service Design Elements
Structural
- Delivery system
- Facility design
- Location
- Capacity planning
Managerial
- Service encounter
- Quality
- Managing capacity and demand
- Information
New Service Development Cycle
• Full-scale launch
• Post-launch review
Full Launch Enablers Development
• Formulation
of new services
objective / strategy
People
• Idea generation
• Service design
and screening
and testing
• Concept
• Process and system
development and
design and testing Product testing
• Marketing program
design and testing
• Personnel training Technology Systems
• Service testing and
pilot run
• Test marketing Tools
Design Analysis
• Business analysis
• Project authorization
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
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
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 b uilding
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
• 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
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.
What are some drawbacks of customer
participation in the service delivery process?
What ethical issues are raised in the promotion of
sales during a service transaction?
100 Yen Sushi House
1. Prepare a service blueprint for the 100 Yen Sushi
House.
2. What features differentiate 100 Yen Sushi House
and how do they create a competitive advantage?
3. How has the 100 Yen Sushi House incorporated
the just-in-time system into its operations?
4. 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. Prepare a service blueprint for Commuter
Cleaning.
2. What generic approach to service design is
illustrated by Commuter Cleaning, and what
competitive advantage does this offer?
3. 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.
4. Critique the business concept, and make
recommendations for improvement.
Golfsmith
1. Prepare a service blueprint for Golfsmith.
2. What generic approach to service design
does Golfsmith illustrate and what
competitive advantages does this design
offer?
3. 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.