Lecture

3
Design and Development of Services
IT as competitive environment
Service encounter
 New Services during COVID-19
•  Mirror, Mirror on the wall
•  Mirror, a home-workout business, was snapped up
by Lululemon, a maker of snazzy yoga pants, for
$500m. Mirror makes body-length wall-mounted smart
screens through which exercisers can interact online
with buff personal trainers live or on-demand. The
pandemic has been a boon for the high-end fitness
industry. But once gyms reopen it remains to be seen
whether people will still splash out $1,500 for one of
Mirror’s screens, or just plod and puff on a treadmill.
•  4th July, The Economist, Business World 2020
 Service System Design

Comprised of

Structural Elements Managerial Elements

Delivery Location Capacity Service Information

System Planning Encounter

Facility Quality
Managerial
Design Capacity &
Demand

To achieve strategic service vision

Service system elements which form a blueprint to communicate the service concept to
customers and employees
 Agenda- Learning outcomes
•  New service development
•  Approaches to service design
•  Role of information and IT in services
•  Other sources of growth of services

 New Service development
•  Why companies should develop new services?
or Innovate continuously
•  Challenges in Innovation
•  Is it same as innovation in manufacturing
companies?
 Challenges in service innovation
•  may not use specific resources in the form of
R&D
•  may be are not result of deliberate activity at
all
•  recognized only a posteriori as they emerge in
the process of service provision on the basis of
customer’s specific needs
•  difficult to realize on the job innovation
A new service is defined as an offering not previously available to the customers.

Service Innovation

Radical Innovation Incremental Innovation

Changes / improvements in existing
Service not previously available services
Example: Amazon.com Example: Web – check in for air travel

(By Johnson et al., 2000)

 Radical Innovation

•  Major Innovation
–  New service for markets as yet undefined mostly
driven by information and computer based
technology such as eBay
•  Start-up Business
–  New services in a market that is already served by
existing services such as make-my-trip, clear trip
•  New Services for the Market Presently Served
–  New service offerings to existing customers of an
organization such as ATMs at Airport
 Incremental Innovation

•  Service Line Extensions
–  Augmentation of existing service line such as new
menu items in some restaurants
•  Service Improvements
–  Changes in features of currently offered service such
as web based check-in services offered by airlines
•  Style Changes
–  Modest visible changes in appearances such as
changes in aesthetics

NEW SERVICE DEVELOPMENT CYCLE WITH SERVICE
DELIVERY SYSTEM

Design

Development
 Service Blueprinting (G. Lynn Shostack)
•  How to translate the new service developed
based on subjective ideas into reality?
•  Capture service delivery system in a visual
diagram
•  Flowchart of all transactions constituting
service delivery process
•  First step in developing a service process
structure – Positioning into competitive
market

IIT MADRAS Arshinder 11

 Blueprint- Testing of the service concept
Physical Evidence
Customer will see and experience

Customer initiated steps, choices and interactions during the process of

purchasing consuming and evaluating service

Line of Interaction

On stage contact person

Actions in the full view of customer

Line of Visibility

Back stage contact person

Actions not seen by customer

Line of Internal Interaction

Support process
Capacity requirement of the back office system

IIT MADRAS Arshinder 12

 Service Blueprint of Luxury Hotel

IIT MADRAS Arshinder 13

 Advantages: Blueprint
•  visually see the activities: Direct contact or
back office
•  determine potential areas where service
failure may occur
•  problem solving and creative thinking : Tool to
Innovate
•  Address quality issues right at the design
stage: Avoid losses due to failure at later stage
https://www.youtube.com/watch?v=2QCCEFMFNU8
 Service system design based on the
service process
A Service process can be classified based on
•  Degree of complexity : service concept
•  Degree of divergence: Effort by service
provider
•  Degree of customer contact : Service
encounter
•  Actual recipient of service: Responsibility of
service provider
 Degree of Complexity
•  The number and intricacy of steps in the service
blueprint. A specialist clinic Vs a big hospital

Low-complexity
Narrow scope of service or specialized focused strategy.
Effort: very high quality and perceived to be unique

High complexity
Increase customer base

Effort: Maximize revenue and the objective is to gain
greater market penetration
 Degree of Divergence
•  Amount of discretion and freedom permitted to the server to
customize the service.
•  Standardization Vs Customization

Low-divergence
Standard services generally involved routine task.
does not require specialized skill
provide consistent quality and reduced cost

High-divergence
It can be viewed as niche strategy where customer is willing to pay
extra money for the personalized value perceived and received by the
service.
 Types of customer contact
Types of customer contact

Indirect customer
Direct customer contact Direct customer contact
contact

No customer
Customer
interaction
interaction
(Self-service)
 Actual recipient of service
•  Service can be processed on the customer’s
body physically
•  Service can be performed on the customer’s
property or on the goods
•  Service can be seen as information processing
where service is performed utilizing some
customer’s data
 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
 Production line approach
Routine services, controlled environment and
consistent quality
•  Limit Discretion of Personnel
–  Standardized routine services
–  Consistency in service performance
•  Division of Labor
–  Divide job into group of simple tasks
•  Substitute Technology for People
•  Standardize the Service
–  Limited service options
–  Opportunities for predictability and preplanning

IIT MADRAS Arshinder 21

•  https://www.youtube.com/watch?
v=2aygOeio0ws
 Customer as Coproducer
Shifting some of service activities onto the
customer
•  Self Service
–  Increase degree of customization (Pizza Hut)
–  Customer brings extra capacity
•  Smoothing Service Demand
–  Uniform utilization of capacity (reservations)

IIT MADRAS Arshinder 23

 Service encounter
A situation or episode in which
the customer in the form of human being or machine
comes into contact with
any aspect of the organization through employee or
machine
to experience the service & of service organization &
perceive the quality of service within service scape or
virtual contact.
It is also known as moment of truth.
Service space: The physical environment of the supporting
service facility influences both a customer and service
provider aligned with the service concept
Elements of service encounter

Service organization Service

Scape
Service delivery
system

Contact personnel
Customer
or machine
 What we have learnt
•  New service development- Innovation
•  Service design system
•  Service delivery process
•  Information and Technology
•  Service encounter