1. 1 New Service Development and Process Design

2. 2 Origin of new services u Human needs – stimulus for new services u Need for survival and growth in the private sector u Social needs not adequately covered by private sector – stimulus for public sector

3. 3 Life cycle of a service u Infancy: many risks; high mortality rate; slow growth of demand u Growth: acceptance by customer –Pressures for additional capacity –More efficient service –Adjustments in managerial style u Maturity: demand reaches saturation level (long duration for services that meet genuine need) u Decline: changes in economy, new improved services, changes in technology When to introduce new services?

4. 4 Steps in service design u Idea generation u Selection: compatibility with organization’s goals and resources –Private sector, drop the idea if: »Not much profit »Deteriorates company image »Incompatible with skills, facilities –Public sector »Goals less easily definable (public welfare) »Little attention to operational issues

5. 5 Steps in service design u Preliminary design: little product testing. Marketing present –Specify key attributes of service package u Final design: specify service level

6. 6 New Service Development Cycle People Technology Systems Product Full Launch Development Design Analysis Organizational Context Teams Tools Enablers Formulation of new services objective / strategy Idea generation and screening Concept development and testing Business analysis Project authorization Full-scale launch Post-launch review Service design and testing Process and system design and testing Marketing program design and testing Personnel training Service testing and pilot run Test marketing

7. 7 Levels of Service Innovation u Major Innovation: new service driven by information and computer based technology u Start-up Business: new service for existing market u New Services for the Market Presently Served: new services to customers of an organization (some courses on-line) u Service Line Extensions: augmentation of existing service line (e.g. new elective courses) u Service Improvements: changes in features of currently offered service (bidding system) u Style Changes: modest visible changes in appearance

8. 8 Technology Driven Service Innovation u Power/energy - International flights with jet aircraft u Physical design - Enclosed sports stadiums u Materials - Astroturf u Methods - JIT and TQM u Information - E-commerce using the Internet

9. 9 Classification of Service Automation u Fixed-sequence (F) - parking lot gate u Variable-sequence (V) - ATM u Playback (P) - answering machine u Numerical controlled (N) - animation u Intelligent (I) - autopilot u Expert system (E) - medical diagnosis u Totally automated system (T) - EFT

10. 10 Adoption of New Technology in Services u Challenges of Adopting New Technology The Process is the Product Back Office vs Front Office Changes Need for Standardization u Managing the New Technology Adoption Process

11. 11 Service Blueprinting (Bank Lending Operation Example) Loan application Branch Officer Pay book 30min--1hr. Line of visibility Deny 1 day 2 days 3 days Fail point Customer wait Employee decision === ==== =====$ 0 $========= Receive Payment Final payment Decline Notify customer Issue check Confirm Credit check Accept Print payment book Delinquent Close account Verify income data Initial screening Verify payer Employer Credit bureau Branch records Bank accounts Accounting Data base records F W Confirm w w F F F F F F

12. 12 Service Blueprint of Luxury Hotel

13. 13 u Service design=process selection CustomerTechnology Worker Uncertainty and complexity Service design = procedures through which workers carry out the process –Procedures for: »Information exchange »Material delivery/exchange »Monetary exchange »Contact Variable sequence, occur concurrently, differ in duration Service Design and Process Selection in HC system

14. 14 Service Design and Process Selection in LC system u Similar to manufacturing tangible output WorkerTechnology u Process selection through a range of options available with respect to equipment and procedures

15. 15 Basic Types of Processes u Project –Long duration –Low volume –One of a kind Well-defined activities Duration affected by completion of critical activities

16. 16 Basic Types of Processes u Batch (job shop) –Short duration –Low volume –Custom made Different sequence of activities for each customer Scheduling

17. 17 Basic Types of Processes u Line (flow shop) –Short duration –High volume –Standard product Standardised services Routine sequencing Line balancing

18. 18 Basic Types of Processes u Continuous Critical issue: deployment of service resources A measure of performance: travel time to customer

19. 19 Process Selection u Steps arranged in a logical sequence u Capacity at each step must be balanced to minimise bottlenecks u Certain steps can be eliminated, or process shortened by paralleling steps u Appropriate flexibility at each step

20. 20 Process Selection - Time u Access time: from first attempt to obtain service until the start of customer service u Queuing time: length of queue, integrity of queue u Action time: time to provide the service

21. 21 Strategic Positioning Through Process Selection u Degree of Complexity: Measured by the number of steps in the service blueprint. For example a clinic is less complex than a general hospital. u 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.

22. 22 Structural Alternatives for a Restaurant 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 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 Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors D’oeuvres 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 LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE

23. 23 Production-line Approach to Service Design Design the system to control the process u Limit Discretion of Personnel: standardization and consistency u Division of Labor: specialisation of skills; pay only for required skills u Substitute Technology for People: soft technology (marker card in display for replenishment) u Standardize the Service: limit service array –Opportunity for pre-planning; predictability –Uniformity in quality –Franchising possible

24. 24 Customer Participation Ranges from self-service to complete dependence on service provider u Substitution of consumer labor for provider labor: encourage co-production by customer (free air miles for Internet ticketing). Lower cost service u Promote Demand Smoothing: requires participation of customer. They must adjust the time of their demand to service availability –Half-price drinks before 6:00pm –Reservations & appointments: compensation for customer is to avoid waiting time u Use customer to assume a diagnostic role

25. 25 Methodology for Process Selection u Determine service stages u Determine alternative methods or technologies to perform operations at each stage (involves distributing tasks between men and machines) u Preliminary selection of alternative methods: must meet expected level and timing of output

26. 26 Methodology for Process Selection u Detailed alternative service production: combine alternatives at each stage –Methods must be compatible –Each combination is analysed on the basis of »Performance criteria: capacity »Economic criteria: purchase, installation, start-up costs, production costs) »Qualitative criteria: operating flexibility, safety, intangibles, negatives (noise) u Evaluation and final selection

27. 27 100 Yen Sushi House Layout Miso and Tea Station CONVERSATION AREA Dishwashing Counter in Back ENTRANCE CONVEYOR BELT TAKE-OUT POSITION = CHEF

28. 28 100 Yen Sushi House Blueprint Customer Provider Activities Activities Enter Welcome Customers Seat Themselves Serve Accessories Make Paste Make Selection Prepare Selections Review Demand Make Tea Cook with Attn. to Flavor Eat Fill Tea Remove Uneaten Sushi Stack Plates Get from Inventory Pay Count Plates Leave Thank Customer Stock Inventory Remove Accessories Line of Visibility Tell Friends Wash Plates, etc. Provide High Quality Ingredients F F F F F F F