New Service Development

and Process Design

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.

New Service Development Cycle

Full-scale launch
Post-launch
review

Full Launch

Enablers

Formulation
of new services
objective / strategy
Idea generation
and screening
Concept
development and
testing

People

Product
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

Development

Systems

Tools

Design

Analysis
Business analysis
Project
authorization

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

Adoption of New Technology in

Services
Challenges of Adopting New Technology
The Process is the Product
Back Office vs Front Office Changes
Need for Standardization
Managing the New Technology Adoption
Process
Ten step process with concern for
employees and customers

Service Blueprint of Luxury Hotel

Blending Blueprinting with Lean

Womack and Jones, Lean Consumption, HBR March 2005.

Principles of Lean Consumption:

1.

Solve the customers problem completely by ensuring that all the

goods and services work, and work together

2.

Dont waste the customers time

3.

Offer services through all desired channels, on-line, local, big-box,

phone

Provide whats wanted where its wanted exactly when its wanted

6.

Prevent stockouts from long supply chains

Nikes custom bags from NuSewCo in San Francisco

Provide whats wanted exactly where its wanted

5.

Enhanced blueprint: add value-creating, and wasted time for customer and
provider. Calculate total time and % value added.

Provide exactly what the customer wants

4.

Home: search, find, purchase, maintain, repair, upgrade

Cell phone: calling, pda, pictures, music, hot synch., downloads, internet

Sometimes this may be some time off. Could I get it customized merely by
sharing plans?

Continually aggregate solutions to reduce the customers time and

hassle.

One stop for the really big problems: mobility, communications, shelter,
health care, financial management, shopping.

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

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

TAKE RESERVATION
SEAT GUESTS, GIVE MENUS
SERVE WATER AND BREAD
TAKE ORDERS
PREPARE ORDERS

Pre-prepared: No Choice

Salad (4 choices)

Limit to Four Choices

Entree (15 choices)

Sundae Bar: Self-service

Dessert (6 choices)

Coffee, Tea, Milk only

Serve Salad & Entree Together:
Bill and Beverage Together
Cash only: Pay when Leaving

Beverage (6 choices)
SERVE ORDERS

COLLECT PAYMENT

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

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

Taxonomy of Service Processes

Degree of Customer
Contact

No Customer Contact

Low Divergence (Standardized Service)

High Divergence (Customized Service)

Processing of
Goods

Processing of
Information or
Images

Processing of
Goods

Processing of
Information
or Images

Dry cleaning
Restocking a
vending
machine

Check
processing
Billing for a
credit card

Auto repair
Tailoring a
suit

Computer
programming
Designing a
building

Indirect Customer Contact

Direct
Customer
Contact

Processing of
People

Ordering
groceries
from a home
computer
Phone-based
account
balance
verification

Processing of
People

Supervision
of a landing
by an air
controller
Bidding at a
TV auction

No customerservice
worker
interaction
(self-service)

Operating a
vending
machine
Assembling
pre-made
furniture

Withdrawing
cash from an
automatic
bank teller
Taking
pictures in a
photo booth

Operating an
elevator
Riding an
escalator

Sampling
food at a
buffet dinner
Bagging of
groceries

Documenting
medical
history at a
clinic
Searching for
information in
a library

Driving a
rental car
Using a
health club
facility

Customerservice
worker
interaction

Food serving
in a
restaurant
Car washing

Giving a
lecture
Handling
routine bank
transactions

Providing
public
transportation
Providing
mass
vaccination

Home carpet
cleaning
Landscaping
service

Portrait
painting
Counseling

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
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

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.

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 breakeven 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.

100 Yen Sushi House Questions

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

100 Yen Sushi House Service Package

Supporting Facility

Facilitating Goods
Information

Explicit Service
Implicit Service

INTERACTIVE CLASS EXERCISE

The class breaks into small groups and

prepares a service blueprint for Village
Volvo.