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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 Idea generation and screening Concept development and testing

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

Product

Technology
Tools

Systems

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
No Reservations Self-seating. Menu on Blackboard Eliminate Customer Fills Out Form

CURRENT PROCESS
TAKE RESERVATION SEAT GUESTS, GIVE MENUS SERVE WATER AND BREAD TAKE ORDERS PREPARE ORDERS Salad (4 choices) Entree (15 choices) Dessert (6 choices) Beverage (6 choices) SERVE ORDERS

HIGHER COMPLEXITY/DIVERGENCE
Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors Doeuvres At table. Taken Personally by Maltre d

Pre-prepared: No Choice Limit to Four Choices Sundae Bar: Self-service Coffee, Tea, Milk only Serve Salad & Entree Together: Bill and Beverage Together Cash only: Pay when Leaving

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

COLLECT PAYMENT

Choice of Payment. Including House Accounts: Serve Mints

Taxonomy of Service Processes


No Customer Contact Low divergence (standardized service) Processing Processing of goods Information Dry Check Cleaning processing Restocking Billing for a a vending credit card machine Ordering groceries from a home computer 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 Processing of people High divergence (customized service) Processing Processing of goods Information Auto repair Computer Tailoring a programming suit Designing a b uilding 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 Processing of people

Indirect customer contact

Direct Customer Contact

Giving a lecture Handling routine bank transactions

Haircutting 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

Customer Value Equation

Re sults Pr oduced Pr ocessQuality Value Pr ice CostsofAcq uiringtheService

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.

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.