New Service Development

1. New Service Development

2. 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.

3. 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

4. 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

5. Service Design Elements • Structural- Delivery system- Facility design- Location- Capacity planning • Managerial- Service encounter- Quality- Managing capacity and demand- Information

6. New Service Development Cycle • Full-scale launch • Post-launch review Full Launch Development Enablers • Formulation • of new services • objective / strategy • Idea generation • and screening • Concept • development and • testing People Organizational Context Teams • 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 Systems Tools Analysis Design • Business analysis • Project authorization

7. Service Blueprint of Luxury Hotel

8. 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.

9. Structural Alternatives for a Restaurant LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE 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 COLLECT PAYMENT No Reservations Self-seating. Menu on Blackboard Eliminate Customer Fills Out Form 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 Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors D’oeuvres At table. Taken Personally by Maltre d’ 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 Choice of Payment. Including House Accounts: Serve Mints

10. 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

11. 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

12. Customer Value Equation

13. 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?

14. 100 Yen Sushi House • 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.

15. 100 Yen Sushi House Layout Dishwashing Counter in Back CONVERSATION AREA Miso and Tea Station CONVEYOR BELT CONVERSATION AREA TAKE-OUT POSITION ENTRANCE = CHEF

16. Commuter Cleaning - New Venture Proposal • 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.

17. Golfsmith • 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?

18. INTERACTIVE CLASS EXERCISE The class breaks into small groups and prepares a service blueprint for Village Volvo.