Chapter 04 New Service Development
McGraw-Hill/Irwin Service Management: Operations, Strategy, and Information Technology, 6e
Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Describe the fundamental characteristics of service innovation. Describe the four structural and four managerial elements of service design. Describe the components of the customer value equation. Explain and differentiate what is meant by the divergence and the complexity of a service process. Describe the sequence of states and the enablers of the new service development process. Prepare a blueprint for a service operation. Explain the difference between direct and indirect customer contact. Compare and contrast the four approaches to service system design: production-line, customer as coproducer, and information empowerment.
.Innovation in Services
Basic Research: Pursue a planned search for new knowledge regardless of possible application. Development: Apply knowledge to problems to improve a current service. Applied Research: Apply existing knowledge to problems in creation of new service.
Degree of integration required. Ability to build prototypes or conduct tests in a controlled environment.Challenges for Service Innovation
Ability to protect intellectual and property technologies.
. Incremental nature of innovation.
Service Improvements: changes in service delivery process (e.g. new menu items). Style Changes: modest visible changes in appearances.g. Start-up Business: new service for underserved market. Incremental Innovations Service Line Extensions: augmentation of existing service line (e.Levels of Service Innovation
Radical Innovations Major Innovation: new service that customers did not know they needed. New Services for the Market Presently Served: new services to customers of an organization.
. self-service boarding kiosk).
Technology-Driven Service Innovations
Source of Technology Power/energy Service Example Jet aircraft Nuclear energy Hotel atrium Enclosed sports stadium Photochromic glass Synthetic engine oil Just-in-time (JIT) Six Sigma E-commerce Satellite TV Service Industry Impact International flight is feasible Less dependence on fossil fuel Feeling of grandeur/spaciousness Year-around use Energy conservation Fewer oil changes Reduce supply-chain inventories Institutionalize quality effort Increase market to world-wide Alternative to cable TV
six-sigma Encounter triad. outsourcing Process structure. strategic positioning Servicescapes. yield management. use of Internet Measurement. location strategy Strategic role. supply relationships. culture. queue management Demand
. planning criteria Topics
Managing Capacity and Strategies. scalability. design quality. service blueprint. site selection. recovery. tools. queuing models. architecture.Service Design Elements
Design Elements Structural Delivery system Facility design Location Capacity planning Managerial Information Quality Service encounter Technology. layout Geographic demand. process flows.
New Service Development Cycle
• Full-scale launch • Post-launch review
Or ga n Co iz atio nte na l xt
• Formulation of new services objective / strategy • Idea generation and screening • Concept development and testing
• Service design and testing • Process and system design and testing • Marketing program design and testing • Personnel training • Service testing and pilot run • Test marketing
s am Te
• Business analysis • Project authorization 4-8
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. For example the activities of an attorney contrasted with those of a paralegal. Degree of Divergence: Amount of discretion permitted the server to customize the service.
Structural Alternatives for a Restaurant
LOWER COMPLEXITY/DIVERGENCE No Reservations Self-seating. Tea. Hand Grind Pepper Choice of Payment. Liqueurs Separate-courses. GIVE MENUS SERVE WATER AND BREAD TAKE ORDERS Salad Bar Entree (6 choices) Dessert (6 choices) Beverage (6 choices) SERVE ORDERS CASH OR CREDIT CARD HIGHER COMPLEXITY/DIVERGENCE Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors D’oeuvres At table. Menu on Blackboard Eliminate Customer Fills Out Form Pre-prepared: No Choice Limit to Four Choices Sundae Bar: Self-service Coffee. Bone Fish at Table Expand to 12 Choices Add Exotic Coffees. Taken Personally by Maltre d’ Salad (4 choices) Expand to 10 Choices: Add Flaming Dishes. Wine list. Milk only Serve Salad & Entree Together: Bill and Beverage Together Cash only: Pay when Leaving CURRENT PROCESS TAKE RESERVATION SEAT GUESTS. Including House Accounts: Serve Mints
Taxonomy of Service Processes
No Customer Contact Indirect customer contact No customerservice worker interaction (selfservice) Customer service worker interaction 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 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 building Supervision of a landing by an air controller Operating an elevator Riding an escalator Sampling Documenting Driving a food at a medical rental car buffet dinner history Using a Bagging of health club groceries Searching for facility information in a library Providing Home Portrait Haircutting public carpet painting Performing transit cleaning Counseling a surgical Mass Landscaping operation vaccination service Processing of people
Direct Customer Contact
Giving a lecture Handling routine bank transactions
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-Generated Content Customer Contact • Degree of Customer Contact • Separation of High and Low Contact Operations • Sales Opportunity and Service Delivery Options Information Empowerment • Employee • Customer
Customer Value Equation
( Re sults Pr oduced ) + ( Pr ocessQuality ) Value = ( Pr ice ) + ( CostsofAcquiringtheService)
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? Go to http://www.oecd.1.org/home and find the current nonmanufacturing share of total business R&D for the countries listed in Table 1.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. Are there any surprises?
Prepare a service blueprint for the 100 Yen Sushi House.
4.100 Yen Sushi House
3. 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. 2.
100 Yen Sushi House Layout
Dishwashing Counter in Back CONVERSATION AREA Miso and Tea Station CONVEYOR BELT
TAKE-OUT POSITION ENTRANCE = CHEF
Critique the business concept.000 shirts and the contract with a cleaning plant stipulates a charge of $0.
Prepare a service blueprint for Commuter Cleaning. and make recommendations for improvement.
3.Commuter Cleaning .
. and what competitive advantage does this offer? Using the data in Table 4.7 calculate a break-even price per shirt if monthly demand is expected to be 20. What generic approach to service design is illustrated by Commuter Cleaning.
4.50 per shirt. 2.New Venture Proposal
Prepare a service blueprint for Golfsmith.
3. 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.