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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. Applied Research: Apply existing knowledge to problems in creation of new service. Development: Apply knowledge to problems to improve a current service.
Systems integration e. how can a service being tested in a lab? 4-4 . e.g.g.g. Incremental nature of innovation.g. e. restaurant Ability to build prototypes or conduct tests in a controlled environment.Challenges for Service Innovation Ability to protect intellectual and property technologies. e. banks Degree of integration required.
e.g.g. Service Improvements: changes in service delivery process (e. drive-through Start-up Business: new service for underserved marketcredit-card customized for certain hypermarket New Services for the Market Presently Served: new services to customers of an organization.Levels of Service Innovation Radical Innovations Major Innovation: new service that customers did not know they needed. bank branches in hypermarket. 4-5 . new menu items)..g. self-service boarding kiosk). Incremental Innovations Service Line Extensions: augmentation of existing service line (e.g. e.
g.g. (e.g. first class check-in special lounge) Service Improvements: changes in service delivery process (e. self-service boarding kiosk) Style Changes: modest visible changes in appearances.Levels of Service Innovation Incremental Innovations Service Line Extensions: augmentation of existing service line (e. petronas oil station) 4-6 .
New Service Development Cycle • Full-scale launch • Post-launch review Full Launch Enablers Development • Formulation of new services objective / strategy • Idea generation and screening • Concept development and testing People • Service design and testing • Process and system design and testing • Marketing program design and testing • Personnel training • Service testing and pilot run • Test marketing Product Technology Tools Systems Design Analysis • Business analysis • Project authorization 4-7 .
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 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 Facility design Materials Methods Information E-commerce Satellite TV Increase market to world-wide Alternative to cable TV 4-8 .
use of Internet Measurement. yield management. supply relationships. planning criteria Topics 4-9 . layout Geographic demand. process flows.Service Design Elements Design Elements Structural Delivery system Facility design Location Capacity planning Managerial Information Quality Service encounter Managing Capacity and Demand Technology. queuing models. location strategy Strategic role. strategic positioning Servicescapes. queue management Process structure. scalability. service blueprint. recovery. culture. design quality. architecture. six-sigma Encounter triad. site selection. outsourcing Strategies. tools.
Service Blueprint of Luxury Hotel 4-10 .
For example a clinic is less complex than a general hospital. 4-11 .Strategic Positioning Through Process Structure Degree of Complexity: Measured by the number of steps in the service blueprint. 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.
GIVE MENUS SERVE WATER AND BREAD TAKE ORDERS HIGHER COMPLEXITY/DIVERGENCE Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors D’oeuvres At table. Bone Fish at Table Expand to 12 Choices Add Exotic Coffees.Structural Alternatives for a Restaurant LOWER COMPLEXITY/DIVERGENCE No Reservations Self-seating. Liqueurs Separate-courses. Including House Accounts: Serve Mints 4-12 . Milk only Serve Salad & Entree Together: Bill and Beverage Together Cash only: Pay when Leaving Salad Bar Entree (6 choices) Dessert (6 choices) Beverage (6 choices) SERVE ORDERS Salad (4 choices) Expand to 10 Choices: Add Flaming Dishes. Wine list. Menu on Blackboard Eliminate Customer Fills Out Form CURRENT PROCESS TAKE RESERVATION SEAT GUESTS. Taken Personally by Maltre d’ Pre-prepared: No Choice Limit to Four Choices Sundae Bar: Self-service Coffee. Tea. Hand Grind Pepper CASH OR CREDIT CARD Choice of Payment.
Taxonomy of Service Processes Low divergence (standardized service) Processing of goods No customer contact •Dry Cleaning •Restocking a vending machine Processing Information •Check processing •Billing for a credit card •Ordering groceries from a home computer •Operating a vending machine •Assembling premade furniture •Withdrawing cash from an ATM •Operating an elevator •Riding an escalator •Sampling food at a buffet dinner •Bagging of groceries Processing of people High divergence (customized service) Processing of goods •Auto repair •Tailoring a suit Processing Information •Computer programming •Designing a building •Supervision of a landing by an air controller •Documenting medical history •Searching for information in a library •Driving a rental car •Using a health club facility Processing of people Indirect customer contact Direct Customer Contact No customerservice worker interaction (selfservice) Customer service worker interaction •Food service in a restaurant •Hand car washing •Giving a lecture •Handling routing bank transactions •Providing public transit •Mass vaccination •Home carpet cleaning •Landscaping service •Portrait painting •Counseling •Haircutting •Performing a surgical operation 4-13 .
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 4-14 .
Customer Value Equation Re sults Pr oduced Pr ocessQuality Value Pr ice CostsofAcq uiringtheService 4-15 .
100 Yen Sushi House Layout Dishwashing Counter in Back CONVERSATION AREA Miso and Tea Station CONVEYOR BELT CONVERSATION AREA TAKE-OUT POSITION ENTRANCE = CHEF 4-16 .
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. 4. 4-17 .100 Yen Sushi House Questions 1. 2. 3. Prepare a service blueprint for the 100 Yen Sushi House.
COMMUTER CLEANING A New Venture Proposal 4-18 .
3.Commuter Cleaning: New Venture Proposal 1. and what competitive advantage does this offer? Using the data in Table 4. Critique the business concept. 2. 4-19 . What generic approach to service design is illustrated by Commuter Cleaning.7 calculate a breakeven price per shirt if monthly demand is expected to be 20.50 per shirt. Prepare a service blueprint for Commuter Cleaning. 4. and make recommendations for improvement.000 shirts and the contract with a cleaning plant stipulates a charge of $0.
Service Blueprint PHYSICAL EVIDENCE Bag Location Accuracy of Bill Clean CUSTOMER Place Shirts in Bag Take Bag to Outlet Make Payment Pick up Shirts Eat Check-out and Leave Line of Interaction --------------------------------------------------------------------------------------------.----------STATION CSR Attach Color Coded Label 6:00-9:00 am Pay at Pickup Sort Shirts for Pickup 3:30-8:30 pm Process Check-out Line of Visibility ************************************************************************************** Deliver Bags to Central Plant Pick up Shirts at Plant and Distribute DRIVER Credit Card Reminder OFFICE CSR Bill Customer Payment Received? Line of Internal Interaction ----------------------------------------------------------------------------------------------CENTRAL CLEANING PLANT Count Shirts and Record for Billing Clean and Press Shirts Put on Hangers Load on Truck Sorted by Location Registration System 4-20 .
000 = $1.17 4-21 .Breakeven Analysis Fixed Expenses = (Demand)(Price-Charge) $13.404 = 20.000)/20.404 + 10.000 (Price .50) Price = (13.0.
Golfsmith 1. 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? 4-22 . 3. 2. Prepare a service blueprint for Golfsmith.
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.oecd.1.org/home and find the current non-manufacturing share of total business R&D for the countries listed in Table 1. 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. Are there any surprises? 4-23 .
4-24 .INTERACTIVE CLASS EXERCISE The class breaks into small groups and prepares a service blueprint for Village Volvo.
got together to visit their old university professor. Offering his guests coffee. Conversation soon turned into complaints about stress in work and life. some plain looking. some exquisite – telling them to help themselves to the coffee. . the professor went to the kitchen and returned with a large pot of coffee and an assortment of cups – porcelain. plastic. highly established in their careers. glass. crystal. some expensive.Something to ponder A group of alumni.
While it is normal for you to want only the best for yourselves. that is the source of your problems and stress. the professor said: “If you noticed.Something to ponder When all the students had a cup of coffee in hand. all the nice looking expensive cups were taken up.” . leaving behind the plain and cheap ones.
” “What all of you really wanted was coffee. In most cases it is just more expensive and in some cases even hides what we drink.Something to ponder “Be assured that the cup itself adds no quality to the coffee. not the cup. but you consciously went for the best cups… And then you began eyeing each other’s cups.” .
and the type of cup we have does not define. .Something to ponder “Now consider this: Life is the coffee. They are just tools to hold and contain Life. money and position in society are the cups. nor change the quality of Life we live. the jobs.
by concentrating only on the cup. we fail to enjoy the coffee God has provided us.” God brews the coffee. not the cups… Enjoy your coffee! .Something to ponder Sometimes.
Leave the rest to God . Care deeply.CONCLUSIONS “The happiest people don’t have the best of everything. Speak kindly. They just make the best of everything.” Live simply. Love generously.
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