Success Factors in New Service Development:

a Literature Review
Tim Posselt1, Kai Frstl1
1
Fraunhofer Center for Applied Research on Supply Chain Services, Germany
New service development (NSD) is a topic of high relevance for decision
makers in service firms and manufacturing firms alike. Although there is a
substantial amount of literature covering NSD success factors, the numer-
ous publications are fragmented and do not provide a comprehensive
overview. This paper identifies the success factors prevalent in literature
and classifies them into three categories according to their emergence in
the development process: Antecedents, NSD Process Success Factors
and Service Success Factors. Furthermore, various influences on success
factors are discussed as well as their importance. With this study, we
strive to provide a starting point for customization and optimization of NSD
in business practice.

1. Introduction

In times of fierce competition, shortening development cycles of new technologies,

and more demanding customer expectations, companies are in constant need of new
approaches to service design and delivery (Smith et al., 2007). As a result, NSD has
not only become an important competitive factor in many industries (Menor et al.,
2002), but has also raised the interest of researchers in the fields of innovation man-
agement, marketing management and operations management (De Brentani, 1989,
Thwaites, 1992, Cooper et al., 1994, Johne and Storey, 1998, Storey and Kelly,
2001, Menor and Roth, 2007). In this paper, the success of NSD is defined by
measures which refer to the NSD project itself (for example by measuring its duration
or cost), as well as the success of the developed and implemented service, ex-
pressed through financial or market factors.
Although the differences among service types are widely recognized (Storey and
Hull, 2010), there has been little research concerning the influence of service charac-
teristics on the factors which determine NSD success. The main reason for the diffi-
culties in identifying general principles for managing operations and marketing prac-
tices across different service types is the poor knowledge about the diversity of
service offerings (Chase and Apte, 2007). It is the objective of this study to provide
an overview and categorization of NSD success factors prevalent in previous litera-
ture. Since the requirements of service development differ according to various con-
text factors (Storey and Hull, 2010), it is also intended to identify such influential fac-
tors. Hereby, we address the following research questions:

Which success factors were referred to in previous literature for the design and
development of services?

Which influential factors are linked to these success factors?

1
In this paper, we will first define the service development process and its phases and
introduce the categories of success factors which will be used as a framework later
on. Subsequently, we will explain our search methodology as well as relevant sample
information. Thereafter, we will present the results of the study with the most im-
portant success factors and the most frequently mentioned influential factors. In con-
clusion, our paper finishes by discussing implications for managers, research limita-
tions and suggestions for further research.

2. NSD success factor classification framework

In this section, we present the process of new service development in order to pro-
vide a basis for understanding the classification framework for NSD success factors
and subsequently introduce the framework itself.

2.1. The NSD process

The process of developing new services can be defined and visualized in process
models. These models specify the development phases which have to be completed
from the initial idea until the final launch of the service (Bullinger and Schreiner,
2006). Such a NSD process model is shown in Figure 1:

Fig. 1: Process Model for the Systematic Development of Services. (Bullinger and Schreiner, 2006)

2
In the start phase, new service ideas are generated. These ideas are analyzed in
terms of the costs and time required, and the risks involved. The most promising ide-
as are selected and an assessment of initial business opportunities is performed
(Song et al., 2009). Thereafter, the specifications of the new service, i.e. resources
required, the service delivery process, market measures, and performance expecta-
tions, are defined. After the necessary resources have been allocated to the task, a
final test of the service specifications is performed in order to detect possible weak-
nesses(Bullinger and Schreiner, 2006). If the specifications pass the testing phase,
the new service is finally introduced to the marketplace.

2.2. Classification framework for NSD success factors

Business processes are defined by the input provided for the process, the process
itself, and the output generated from the process. Hence, it seemed appropriate to
classify the factors determining the success of the NSD process accordingly.
The impact of a companys strategic measures on its ability to generate new services
is not well understood (Froehle et al., 2000). Hence, it was our intent to identify fac-
tors which have an effect on NSD, but which originate before the actual start of the
development and on a more general, organization-wide basis. We classified such
factors as Antecedents of service success. The second group, NSD Process Suc-
cess Factors, encompasses all factors which refer to the development process itself,
the actions taken, and resources used. These factors are influenced by the anteced-
ents and determine the success of the service being developed. In order to guide
actions during the NSD process, it is important to determine which characteristics
differentiate a successful service from an unsuccessful one. Hence, our third group of
success factors, Service Success Factors, is targeted at such characteristics.
Figure 2 provides an overview of the identified categories of NSD success factors
and their point of emergence relative to the service development process presented
in Section 2.1.

Fig. 2: NSD Success Factor Categories

3
3. Methodology

We conduct a structured literature review of articles covering NSD success factors

based on the methodology by David and Han (2004) and modified by Newbert
(2007). In order to find a representative sample of studies in an objective way, the
search for literature was performed in the SciVerse Science Direct database via the
following set of criteria:

In order to achieve substantive relevance of the search results, it was decided

that the title, abstract, or keywords of the article had to contain the term service
development, or one of the terms which are frequently used as synonyms for
NSD: service innovation and service engineering.

In order to eliminate substantially irrelevant articles and assure proximity of re-

search subjects the title, abstract or keywords of the articles had to contain
phrases which included the term success.

The title, abstract, or keywords of the articles had to contain phrases enacting an
influence on success.

A fourth group of methodological search terms was included in order to ensure

the occurrence of empirical data.

These results were refined to include only published journal articles.

All results providing the full text of the articles were extracted.

Unsuitable articles were excluded after screening of titles, abstracts, and full arti-
cles.

Additional studies from the reference lists of the reviewed articles were included if
deemed appropriate.
Table 1 provides a list of the keywords used in the search:

1st set: Subject-Related Keywords Service Development

Service Engineering
Service Innovation
2nd set: Success-Related Keywords Performance
Efficiency
Efficacy
Quality
Result*
Excellence
Success
Outcome*
Output

4
3rd set: Influence-Related Keywords Variable*
Dimension*
Measure*
Criteri*
Element*
Parameter*
Factor*
Determinant*
Characteristic*
Specification*
4th set: Data-Related Keywords Data
Empirical
Finding*
Test
Statistical
Result*
Evidence
Table 1: Keywords Used in the Search

The search resulted in a total of 48 articles. Table 2 shows the total number of re-
maining articles after every step:

STEP CRITERION NUMBER OF RESULTS

1 1st set of keywords 4,213
2 2nd set of keywords 2,128
3 3rd set of keywords 906
4 4th set of keywords 697
5 Only journal articles 455
6 Full article available 297
7 Titles screened 140
8 Abstracts screened 57
9 Full articles screened 40
10 Relevant articles added 48
Table 2: Results After Each Step

The remaining sample of articles was analyzed according to information regarding

the origin and focus of literature on NSD success factors.

5
Fig. 3: Journals Represented in This Study

Figure 3 illustrates the number of articles published per specific journal. A broad
range of journals have published articles on the topic of NSD success factors. The
journal which published the most articles on this topic is the Journal of Product Inno-
vation Management. We will therefore assess the influence of articles from this jour-
nal on the overall results of this study in the discussion of every success factor cate-
gory.
As previously explained, we ensured that all success factors were empirically con-
firmed in their respective articles. Hence, qualitative and quantitative studies were
considered. Figure 4 presents the respective amount of studies which use qualitative,
quantitative or both methods in order to find relevant success factors. Overall, this
review contains 8 qualitative and 37 quantitative studies, as well as 3 studies which
applied both methods.

6
Fig. 4: Research Methods Applied in Studies Reviewed

Previous literature reviews have mentioned a bias of NSD literature towards the fi-
nancial services industry (e.g. Johne and Storey, 1998). If one industry played a
dominant role in this study it might have a negative influence on the generalization of
this reviews results. Figure 5 illustrates the industries researched:

Fig. 5: Overview of Industries

7
Figure 4 demonstrates that the focus is indeed on the financial services industry,
which was reviewed in 11 studies. However, we generated a sample covering multi-
ple sectors of the economy, including a block of 15 studies which also reviewed mul-
tiple sectors themselves. Hence, we do not expect the industry focus to bias our re-
sults.

4. Results

The most frequently mentioned factors will be explained in this section. In order to be
able to explain causalities connecting different categories of success factors, they will
be presented in reversed order. The success factors which emerged from the study
were categorized into three factor families according to their point of occurrence dur-
ing the process of developing new services. The first category, Antecedents of NSD
Success, contains all factors describing pre-conditions in an organization which con-
tribute to a supportive environment for developing services. These factors cannot be
influenced during the development process. The second category, NSD Process
Success Factors, includes factors which have a positive influence and can be applied
and controlled during the process of developing the new service. The third category,
Service Success Factors, covers attributes describing a successful service. Due to
the fact that these aspects have to be considered and implemented during the devel-
opment process, they were included in the comprehensive overview of NSD success
factors.

4.1. Service Success Factors

A service entails a unique experience between the service provider and service cus-
tomer. The constellation of features and characteristics inherent in a service offering
takes place during its development. Hence, it is important to be aware of certain ele-
ments which contribute to the success of a service while designing it. In total, 13
studies identified Service Success Factors. Figure 6 presents an overview of these
factors and the number of studies which identified each factor. The most frequently
mentioned Service Success Factors are presented in this section.

8
Fig. 6: Service Success Factors

According to our review, one main contributor to success is a unique or superior ser-
vice. Providing a better or distinctive product can be achieved in various ways such
as making it adaptable and updatable to specific and changing customer needs, us-
ing innovative technology (Cooper et al., 1994), providing superior quality
(Easingwood and Storey, 1993), or offering superior core attributes and supporting
services (Melton and Hartline, 2010).
In addition to project synergy, ensuring product synergy is another crucial factor for
the success of NSD. Successful services fit their designated markets (De Brentani,
1991, De Brentani, 1989) and customers (Cooper and de Brentani, 1991, De
Brentani, 2001) and are compatible with the organizations other products, marketing
strategy (Easingwood and Storey, 1993), resources (De Brentani, 1989) and capa-
bilities (Ottenbacher and Harrington, 2010).
Employee expertise has been identified as another important factor impacting NSD
performance. Service personnel should demonstrate strong behavioral competen-
cies in order to gain the trust of customers (Neu and Brown, 2005). Employees are
able to make a difference whenever they are in direct contact with the customer by
exuding motivation (Neu and Brown, 2005),friendliness, courtesy, and efficiency
(Cooper et al., 1994). Moreover, the ability to understand the customers problems
and needs is essential in fulfilling their expectations of the service offering. Extensive
technological knowledge (Neu and Brown, 2005) might also be required with certain
types of services.
Tangible evidence was identified as a success factor in two studies. Both of these
were published in the Journal of Product Innovation Management (Cooper and de
Brentani, 1991, De Brentani, 2001). Tangible evidence is the only factor in this study
which is reviewed in detail although it was only addressed in one journal. Since ser-
vices are intangible, generating tangible cues and a clear product identity to help the
customer visualize the offering and thus evaluate its benefits, are crucial for the suc-
cess of service offerings (De Brentani, 2001).

9
Service Success Factors may be understood as characteristics of a successful ser-
vice. The basis for these characteristics is set during the NSD process, where the
service system is designed, target markets are determined, and employees are
trained.

4.2. NSD Process Success Factors

NSD process success factors influence the effectiveness and efficiency with which
the service success factors are implemented. These factors have to be influenced
during the development of the service. NSD Process Success Factors are the largest
group of success factors and are addressed in 40 of the 48 papers. Figure 7 illus-
trates the number of studies in which each factor has been mentioned:

Fig. 7: NSD Process Success Factors

Two factors represent the role of employees in NSD, employee involvement and
employee expertise. Employee involvement refers to the participation of front-line
employees in the development process. In addition to motivating front-line personnel,
it is also crucial to ensure a high level of expertise among the employees conducting
the development activities (Blindenbach-Driessen and van den Ende, 2006, Neu and
Brown, 2005, Leiponen, 2006, De Brentani, 2001).To foster employee expertise,
training measures are conducted to inform employees about the service product and
influence their delivery of the new service offering. Moreover, extensive internal mar-
keting is conducted to raise support and enthusiasm for the product (Cooper et al.,
1994, De Brentani, 1989, Lievens et al., 1997, Melton and Hartline, 2010, Ordanini
and Parasuraman, 2011, Ottenbacher and Harrington, 2010, Song et al., 2009).

10
Furthermore, the process of NSD needs to have an appropriate level of formalization.
While there is evidence that highly formalized development processes make a posi-
tive contribution to the speed of a firms NSD efforts (Froehle et al., 2000, Buganza
and Verganti, 2006, De Brentani, 2001), this does not apply to all development pro-
jects. Especially in turbulent environments and for more radical innovations it seems
to be advantageous to implement non-formalized approaches, for example by adopt-
ing a new process setup for every project and setting less rigid timelines (Storey and
Hull, 2010, Blindenbach-Driessen and van den Ende, 2006).
Management measures which promote the success of development projects range
from behavioral issues, such as the strong and visible support of innovation (Edgett
and Parkinson, 1994) or the display of a risk-taking and innovation friendly attitude
(Ko and Lu, 2010), to more concrete measures such as implementing a development
committee and a project champion (Blindenbach-Driessen and van den Ende, 2006)
or staff evaluation from a customers point of view (Ottenbacher and Gnoth, 2005).
Several authors have found a positive impact of customer involvement in various
stages of the development process (Cooper and de Brentani, 1991, Magnusson,
2009, Melton and Hartline, 2010, Lin et al., 2010). Especially in the stage of idea
generation and screening customer involvement seems to make a significant contri-
bution (Melton and Hartline, 2010, Magnusson, 2009, De Brentani, 1991). Moreover,
the participation of customers in the development process seems to have a signifi-
cant impact on service marketability (De Brentani, 1991), launch preparation (Melton
and Hartline, 2010), operational outcomes and innovation volume, but no impact on
competitive superiority and sales performance and even a negative impact on the
radicalness of innovations (Carbonell et al., 2009).
Market orientation concerns understanding consumer-requirements and desires, as
well as taking competitors into account (Cooper et al., 1994, Ottenbacher and
Harrington, 2010). Market orientation is especially important for the identification of
market opportunities in the process of idea evaluation and the test of already devel-
oped concepts (Song et al., 2009). Planning proactively and foreseeing market
trends gives companies the ability to act as a first mover, thereby giving them an ad-
vantage in market entry (Limpibunterng and Johri, 2009). The processes of infor-
mation acquisition, diffusion, and utilization associated with market orientation either
directly or indirectly influences the likelihood of success for a new service (Van Riel
et al., 2004).
The synergy between the development project and its environment also determines
the success of NSD. As our review indicates, it is important to ensure a general fit
which includes both external (market) and internal (organizational) dimensions. The
project should respond to the demands of the marketplace, constituting a response to
understanding and operationalizing actual changes in consumer needs (Ottenbacher
and Gnoth, 2005, Ottenbacher et al., 2006). Internal synergy entails aligning the vari-
ous resources of a company (De Brentani, 1991, Cooper et al., 1994, Cooper and de
Brentani, 1991) and at the same time, the project must take into account corporate-
internal organizational aspects, such as the service delivery system (Cooper and de
Brentani, 1991), the marketing mix (Ottenbacher and Gnoth, 2005, Ottenbacher et
al., 2006) or the IT system (Bardhan et al., 2007).
Cross-functional involvement is a success factor which has an impact during all stag-
es of the development process: from idea generation to service launch (Avlonitis et

11
al., 2001). Development teams should consist of members of different functional are-
as in order to identify potentials and problems as early as possible, thereby avoiding
costly and time intensive rework. Although there might be time delays to the project
because the entire process becomes more complex, cross-functional work appears
to be more efficient and is more likely to achieve customer satisfaction (Froehle et al.,
2000). Cross-functional involvement seems to be important in companies which rely
heavily on tacit knowledge, where the codification of information is difficult (Storey
and Hull, 2010).
The process quality is determined by the emphasis put on the development phases
and the assiduousness with which actions within these phases are carried out. This
factor is important in all phases from idea generation and analysis to concept devel-
opment, testing, and launch (Avlonitis et al., 2001).

4.3. Antecedents of NSD success

These success factors refer to general organizational aspects such as corporate cul-
ture, structure, and organizational capabilities. A total number of 23 studies men-
tioned factors which were classified as Antecedents. Figure 8 depicts the number of
articles which identified the respective Antecedent as a success factor:

Fig. 8: Antecedents of NSD Success

Market orientation seems to be the most prominent Antecedent of successful NSD.

Atuahene-Gima (1996) defines market orientation as the organization-wide collection
and dissemination of market information, as well as the organizational responsive-
ness to that information. Aspects of market orientation include a strong commitment
to market research (Easingwood and Storey, 1993), the ability of the service organi-
zation to correctly evaluate the competitive environment, and the capacity to antici-
pate and respond to changing expectations of customers (Menor and Roth, 2008). A
high degree of market orientation was stated to have a positive effect on various
measures of success, such as the internal innovation-marketing-fit, customer perfor-

12
mance and the overall project impact (Atuahene-Gima, 1996), as well as the align-
ment of strategy with a complex market (Neu and Brown, 2005) and financial perfor-
mance (Lonial et al., 2008). However, there is disagreement regarding the influence
of market orientation on the degree of innovativeness of the developed services.
While Atuahene-Gima (1996) concludes a negative influence, Ordanini and Par-
asuraman (2011) suggest that customer orientation fosters radical innovation.
Technology as a success factor is characterized by a companys ability to use tech-
nology in developing and delivering services (Neu and Brown, 2005). Innovation and
development processes especially benefit from the use of technology when high lev-
els of synergy, usability, and support are achieved (Froehle et al., 2000). For exam-
ple, by applying more advanced marketing information systems based on the data
acquired from their customers, companies are able to create more service innova-
tions to explore potential markets (Lin et al., 2010).
Knowledge management is about gathering useful information internally and exter-
nally and making it available to the right people in the company. The basis for suc-
cessful knowledge management is external knowledge sourcing (Leiponen, 2005). In
order to ensure an effective diffusion of the knowledge gathered, a free flow of infor-
mation (Van Riel et al., 2004) and collective ownership of knowledge (Leiponen,
2006) should be promoted.
The organizational culture is another important factor. Liu (2009) defines a supportive
culture as a construct of complementary dimensions consisting of innovative support-
ive culture, market orientation culture, learning culture, and customer communication
culture. However, de Brentani (2001) describes it as a highly creative and supportive
environment created by management. Hence, having the right culture in a company
supports essential NSD competencies such as market orientation and customer in-
volvement.
By aligning human resource management to strategic business planning and making
it flexible to changing market needs, strategic HRM constitutes an important organi-
zational capability (Ottenbacher and Gnoth, 2005). It serves as a prerequisite for the
successful creation of project and product synergy with the companys resources in
the latter stages of service development. Furthermore, continuous development of
employee expertise fosters the understanding of consumer preferences and im-
proves the technical and managerial skills needed for successful service develop-
ment (Limpibunterng and Johri, 2009).

4.4. Influential factors

Having identified critical success factors for all three categories, it is important to
know whether the importance of these factors varies depending on certain external or
internal influences. Storey and Hull (2010) stated that it is not possible to use a one
size fits all-approach when developing services. In order to provide additional infor-
mation on the influences of NSD and its success factors, we present such influential
factors which emerged throughout our study in the next chapter.
Storey and Hull (2010) conducted a useful study which investigated the effect of dif-
ferent organizational knowledge management strategies on the process of service
development. They state that for firms which rely mainly on personalized information,

13
where services involve personal interactions and intangible factors, there is an in-
creased need for the formation of cross-functional teams. Moreover, the fuzzy nature
of most development projects also calls for a more disciplined approach. In contrast,
if information within a company can easily be codified, this calls for an increased au-
tomation of processes, resulting in a greater need for investments in technology.
However, there are also determinants impacting the relative importance of NSD suc-
cess factors which are independent from the service strategy chosen by the organi-
zation. De Brentani (2001) explained that with a high degree of innovativeness of the
new service, there is the need for the executive management to create a supportive
and creative environment for service development, hence alternating the composition
of Antecedents for NSD. Avlonitis, Papastathopoulou et al. (2001) elaborated on the
influence of innovativeness in the various stages of service development. These au-
thors state that an emphasis on business analysis and marketing helps achieve
management expectations when developing incremental innovations, while cross-
functional collaboration is especially important for radical innovations. Another con-
sequence of variations in the degree of innovativeness affects the need for formaliza-
tion of the development process. Highly formalized processes seem to help improv-
ing the efficiency in developing incremental innovations and innovations which are
new to the company but not to the world (De Brentani, 2001, Froehle et al., 2000,
Avlonitis et al., 2001).
Process formalization should be adapted to the turbulence of the market environ-
ment. According to Buganza (2006), a highly formalized approach, including prede-
fined activities, phases, and timeframes, is inappropriate for developing products and
services in volatile environments. Market turbulence also impacts group collabora-
tion. Such approaches are more likely to be used to coordinate innovation processes
in turbulent project environments with low structure and high uncertainty (Bardhan et
al., 2007). Furthermore, firms are more likely to involve customers in the develop-
ment process as perceptions of technological turbulence increase (Carbonell et al.,
2009).

5. Conclusion

The aim of this paper was to provide an overview and categorization of NSD success
factors prevalent in literature.
The fragmentation of the results indicates that knowledge about the factors responsi-
ble for NSD success is limited. From a total of 52 success factors, only 23 were men-
tioned in more than one study. Even the most frequently mentioned factors of each
category were only addressed in a relatively small amount of studies. This justifies
our initial intent of providing NSD with a comprehensive overview and structure of
factors leading to a high performance of service development projects. The identified
factors were classified into three categories according to their emergence in the de-
velopment process: Antecedents, NSD Process Success Factors and Service Suc-
cess Factors. However, in different development projects, these factors can vary in
relevance, depending on various influential context factors. We described the influen-
tial factors mentioned in the studies, reviewed these factors, and highlighted adjust-
ments which should be made to the development process. Hereby, this study adds to

14
the body of literature stating that applying measures for NSD without taking influential
factors into account might not lead to the desired results.
There are numerous areas for further exploration of NSD success factors. There still
is a need for investigation of context dependency since not all influential factors and
their type of impact are known. Regarding the limited amount of knowledge about the
appropriate situational orchestration of success factors, future research should aim at
conducting qualitative and quantitative research using heterogeneous samples of
companies, thereby paving the way for the development of a comprehensive model
linking NSD success factors to influential context factors.
Furthermore, we did not find resilient information about the cost-benefit relations for
any of the success factors mentioned. Despite our broad sample of industries some
sectors were not covered in this study at all. This indicates that there is a need for
further research regarding NSD success factors in the transport and the energy sec-
tor, for example. In conclusion, there are still many steps to be taken until managers
can be provided with a toolbox for service development.
There are certain limitations which have to be considered regarding the results of this
work. Many of the identified success factors have only been mentioned in one study.
Considering this fact, and taking into account that we do not claim to have included
all studies covering the topic of NSD success factors, there is a high likelihood for the
existence of additional success factors. The same limitation applies for the context
factors mentioned in this study.

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Author Adresses

Tim Posselt
Fraunhofer Center for Applied Research on Supply Chain Services
Nordostpark 93
90411 Nrnberg
Germany
tim.posselt@scs.fraunhofer.de

Kai Frstl, Dr.

Fraunhofer Center for Applied Research on Supply Chain Services
Nordostpark 93
90411 Nrnberg
Germany
kai.foerstl@scs.fraunhofer.de

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