New Service Development

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.
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
 Service Design Elements
 Structural
- Delivery system
- Facility design
- Location
- Capacity planning
 Managerial
- Service encounter
- Quality
- Managing capacity and demand
- Information
 New Service Development Cycle
• Full-scale launch
• Post-launch review

Full Launch Enablers Development

• Formulation

l
nte na
Co izatio of new services
objective / strategy
People
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Te
• Idea generation
• Service design
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am
ga

and screening
and testing

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Or

• Concept
• Process and system
development and
design and testing Product
• Marketing program testing
design and testing
• Personnel training Technology Systems
• Service testing and
pilot run
• Test marketing Tools

Design Analysis
• Business analysis
• Project authorization
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.
 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 HIGHER COMPLEXITY/DIVERGENCE

No Reservations TAKE RESERVATION Specific Table Selection

Self-seating. Menu on Blackboard SEAT GUESTS, GIVE MENUS Recite Menu: Describe Entrees & Specials
Eliminate SERVE WATER AND BREAD Assortment of Hot Breads and Hors D’oeuvres
Customer Fills Out Form TAKE ORDERS At table. Taken Personally by Maltre d’
PREPARE ORDERS

Pre-prepared: No Choice Salad (4 choices) Individually Prepared at table

Limit to Four Choices Entree (15 choices) Expand to 20 Choices: Add Flaming Dishes;
Bone Fish at Table; Prepare Sauces at Table
Sundae Bar: Self-service Dessert (6 choices) Expand to 12 Choices

Coffee, Tea, Milk only Beverage (6 choices) Add Exotic Coffees; Sherbet between
Serve Salad & Entree Together: SERVE ORDERS Courses; Hand Grind Pepper
Bill and Beverage Together

Cash only: Pay when Leaving COLLECT PAYMENT Choice of Payment. Including House Accounts:
Serve Mints
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
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
Customer Value Equation

Value 
 Re sults Pr oduced    Pr ocessQuality 
 Pr ice   CostsofAcquiringtheService
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?
100 Yen Sushi House
1. Prepare a service blueprint for the 100 Yen Sushi
House.
2. What features differentiate 100 Yen Sushi House
and how do they create a competitive advantage?
3. How has the 100 Yen Sushi House incorporated
the just-in-time system into its operations?
4. 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
Commuter Cleaning - New Venture Proposal
1. Prepare a service blueprint for Commuter Cleaning.
2. What generic approach to service design is illustrated
by Commuter Cleaning, and what competitive
advantage does this offer?
3. 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.
4. Critique the business concept, and make
recommendations for improvement.
Golfsmith
1. Prepare a service blueprint for Golfsmith.
2. What generic approach to service design
does Golfsmith illustrate and what
competitive advantages does this design
offer?
3. 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.