Presentation on theme: "New service innovation"— Presentation transcript:
1 New service innovation Chapter 14New service innovation
2 New service development (NSD) IntroductionGrowth in servicesTechnology and new servicesCharacteristics of servicesCustomer relationship processNew service innovationsNSD processSummary & recap
3 Introduction Growth in services Characteristics of services Services are processes where customer is part of itViewed differently to productsServices contribute to new business models:eBay new way of conducting businessRyanair new way of flyingAmazon new way of viewing and buying booksNapster new way to buy music
4 Growth in services – but what does this mean? Within the EU services now account for60% of GDP (Eurostat, 2006).huge growth in coffee bars,smoothie bars and hair salons?Growth in knowledge intensivebusiness services (KIBS)Since 2003, shares in oilcompanies have doubled.Halliburton and Schlumberger, the world market leader for oil services,have more than tripled.
5 Growth in services – but what does this mean? (Continued) So, a company that was earlier employingcleaners,decorators,maintenance workers,canteen staff, etcwould now purchase the services of road and rail transport.
6 Outsourcing and service growth Expected gains that companies can derive from outsourcing include:the reduction of operational costs;the ability to transform fixed costs into variable costs;the ability to focus on core competencies;access to the industry-leading external competencies and expertise.
7 Typology of services Business-to- business services (traditional) Business-to- business services (KIBS)Consumer servicesInternal firm servicesPublic servicesNot-for-profit servicesDescriptionServices provided for businessesSpecialist services provided to businessesServices provided to individualsServices provided by internal functionsServices provided by local and national governmentServices provided by charitiesExamplesAccountancyLegal adviceTrainingManagement consultancyIT consultancyShopsHotelsBankingHealth and beautyFinancePersonnelITHealthEducationLeisurePrisonsHospicesCounsellingAid agenciesCustomersFrequently purchased by professionals, who may not be end usersPurchased by consumer of the serviceConsumers of the service have no choice of providerFunded through taxation and little choice for consumerFunded through charities maybe government grants consumers chosen or choose.ChallengesProviding high-quality tailored and personal serviceProviding high quality services to businesses who have high purchasing powerProviding a consistent service to a wide variety of customersDelivering customised, personal service. And demonstrating value for money.Delivering acceptable public services against a backcloth of political pressures.Balancing needs of volunteers, donors and overwhelming needs of customers.
8 Technology and new service development Technology has become the most significant enabler of innovation in services.Transforming the roles of both employees and customers.Easing the connectivity between service developers and customers.E.g. ebay . . .
9 Technology and new service development (Continued) Founded in September 1995eBay, Inc. is possibly the most successfulweb-based enterprise in existence.Four service dimensionsIllustrationNew service conceptOn-line auction community of tradersNew client interfaceIntroduction of payment system that helps eBayers trade more easily – PaypalNew service delivery systemHuge investment in technology infrastructure to improve reliability and performanceTechnological optionsIntroduction of voice over internet protocol service – SKYPE
10 A range of new services that also create new business models, where technology plays a key role CompanyIndustry sectorNew service/new business modeleBayOn-line auctionA new way of buying and selling through acommunity of individual usersRyanairAirlineA new way of consuming air-travel with no frillsservice and emphasis on economyAmazonRetailerNew way to buy goods – on-line retailerNapster;iTunesMusic retailerNew way to buy and download musicGoogleInternet searchengineA fast way to search for information on theinternetPartygamingOn-line gamblingGambling and gaming from the comfort of yourown homeMyspaceSocial networkingA community of users on-line who can chat and share music, images, news from their own homeYou-TubeOn-line video andfilm archiveA community of users sharing home made video clips plus recorded favourite clips from movies
11 Characteristics of Services Services areco-producedby the customerServices areheterogeneousServices areintangibleServices areprocessesServices areproduced andconsumedsimultaneouslyServices areperishableServices cannotbe transported
12 The customer relationship process ServicequalityServicevalueServicesmarketingCustomervalueCustomerretentionRelationshipqualityCustomersatisfaction
13 New service innovation As with products service, innovations can be classifiedin many ways:eBay was new to the market; Google’s on-line auction is new to Google;Internal process innovations, e.g. Amazon: delivering books to consumer is not new, but using internet;Line extensions to services, e.g. banks offering insurance;Service modifications, e.g internet access to airline passengers.
14 Typology for innovations (Ozdemir, 2007) Booz et al. (1982)Lovelock (1984)New to the world products: new products that not only represent a major new challenge to the supplier, but which are also seen to be quite new in the eyes of customersMajor innovation: new services for markets as yet undefined; innovations usually driven by information and computer-based technologiesNew product lines: new products which represent major new challenges to the supplierStart-up business: new services in a market that is already served by existing servicesAdditions to existing product lines: new products that supplement a company’s established product lines, so rounding out the product mixNew services for the market presently served: new service offerings to existing customers of an organisation (although the services may be available from other companies)Improvements and revisions to existing products: new products that provide improved performance and so replace existing productsService line extensions: augmentations of the existing service line such as adding new menu items, new routes and new coursesRepositionings: existing products that are targeted to new markets or market segmentsService improvements: changes in feature of services that currently are being offeredCost reductions: new products that provide similar performance at a lower cost of supplyStyle changes: the most common of all “new services”; modest forms of visible changes that have an impact on customer perceptions, emotions and attitudes, with style changes that do not change the service fundamentally, only its appearance
15 Customer roles in NPD (Nambisan, 2002) NPD phaseCustomer as resourceIdeationCustomer as co-creatorDesign and developmentCustomer as userProduct testingProduct supportKey Issues/Managerial ChallengesAppropriateness of customer as a source of innovationSelection of customer innovatorNeed for varied customer incentivesInfrastructure for capturing customer knowledgeDifferential role of existing (current) and potential (future) customersInvolvement in a wide range of design and development tasksNature of the NPD context: industrial/consumer productsTighter coupling with internal NPD teamsManaging the attendant project uncertaintyEnhancing customers' product/technology knowledgeTime-bound activityEnsuring customer diversityOngoing activityInfrastructure to support customer-customer interactions
16 The service innovation process Different from NPD: customer is part of the processBlueprinting the serviceIdentify every activity and every possibleoutcome in the process‘Prick-eared’ market researchDirect contact facilitates dialogueService prototypesDifficult because customer is part of processLevel of integration determines ability to prototypeE.g. a doctor’s home visita visit to the cinema
17 Customer interaction process DeterminantsServiceencounterServiceproviderCustomerCustomer rolesEncountermanagementCritical incidents
18 How do customers evaluate services? Perceived service quality . . .Perceived service value . . .Customer expectations . . .ReliabilityResponsivenessAssuranceEmpathyTangibles
19 ReliabilityProviding service as promisedDependability in handling customers’ problemsPerforming services right first timePerforming services at the promised timeMaintaining error free recordsResponsivenessKeeping customer informed when service will be performedPrompt service to customersWillingness to help customersReadiness to respond to customers’ requestsAssuranceEmployees who instil confidence in customersMaking customers feel safe in their transactionsEmployees who are consistently courteousEmployees who have knowledge to answer questions
20 EmpathyGiving customers individual attentionEmployees who deal with customers in a caring mannerHaving the customers best interests at heartEmployees who understand the needs of their customersConvenient business hoursTangiblesModern equipmentVisually appealing facilitiesEmployees who have neat, professional appearanceVisually appealing materials associated with service
21 Categories of service mix Pure tangible goodTangible good with accompanying servicesHybridMajor service with accompanying minor goods and servicesPure service
22 New service innovation For many years the literature overlooked this concept!Innovation deemed to require a new physical “thing”But, the world of business suggested new services could deliver even more significant changes (new business models):First DirectRyanaireBayApple’s iTunes
23 Thank you for listening The EndThank you for listening
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