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
Or ga n Co izatio nte na l xt

Enablers

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

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
Tools

Systems

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
Home: search, find, purchase, maintain, repair, upgrade Cell phone: calling, pda, pictures, music, hot synch., downloads, internet Enhanced blueprint: add value-creating, and wasted time for customer and provider. Calculate total time and % value added. Prevent stockouts from long supply chains Nikes custom bags from NuSewCo in San Francisco Offer services through all desired channels, on-line, local, big-box, phone Sometimes this may be some time off. Could I get it customized merely by sharing plans?

1. 1. 1. 1. 1.

Dont waste the customers time

Provide exactly what the customer wants Provide whats wanted exactly where its wanted Provide whats wanted where its wanted exactly when its wanted 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 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

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 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 Low Divergence (Standardized Service) Processing of Goods Processing of Information or Images Processing of People High Divergence (Customized Service) Processing of Goods Processing of Information or Images Computer programming Designing a building Supervision of a landing by an air controller Bidding at a TV auction Processing of People No Customer Contact Dry cleaning Check processing Restocking a vending machine Billing for a credit card Ordering groceries from a home computer Phone-based account balance verification Auto repair Tailoring a suit

Indirect Customer Contact

Direct Customer Contact

No customerservice worker interaction (selfservice)

Operating a Withdrawing vending machine cash from an Assembling pre- automatic bank made furniture teller Taking pictures in a photo booth Food serving in Giving a lecture a restaurant Handling routine Car washing bank transactions

Operating an elevator Riding an escalator

Sampling food at Documenting a buffet dinner medical history at a clinic Bagging of groceries Searching for information in a library Home carpet cleaning Landscaping service

Driving a rental car Using a health club facility

Customerservice worker interaction

Providing public transportation Providing mass vaccination

Portrait painting Haircutting Counseling 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. 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.

3.

4.

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.