New Service Development and Process Design

Customer Benefit Package   Customer Benefit Package Hierarchy Level Element Core Good Example Core Service Example Category Business Custom clothier Business hotel   First Core Business suits Room for the night Second Peripheral Good Garment bag Bath robe Peripheral Service Deferred payment plans In house restaurant Third Variant Coffee lounge Airport shuttle   

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. Place an example of service automation in it proper category. Discuss the managerial issues associated with the adoption of new technology.

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

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

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

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

Adoption of New Technology in Services Challenges of Adopting New Technology The Process is the Product Back Office vs Front Office Changes Need for Standardization Managing the New Technology Adoption Process Ten step process with concern for employees and customers

Example of Service Blueprinting

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 $ ==== ===== w w Receive Payment Final payment Decline Notify customer Issue check Confirm F F Verify income data Print payment book Credit check Accept Delinquent Close account Initial screening F Verify payer Confirm Employer Credit bureau F Branch records F Bank accounts F Accounting Data base records F W

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 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 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 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

Structural Positioning of Healthcare Services HIGH COMPLEXITY * Hospitals Services * General Practitioner: * Forensic-Testing Lab Diagnosis & Treatment * Diagnostic services only Specialist: * Treatment only LOW DIVERGENCE HIGH DIVERGENCE Outpatient Clinic: Limited * Treatment: e.g. Broken Bones/Minor Burns only * Retailer of Orthopedic Supplies * X-Ray Lab * Medical Counseling LOW COMPLEXITY

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 • Substitution of Customer Labor for Provider • Smoothing Service Demand Customer Contact • Degree of Customer Contact • Separation of High and Low Contact Operations Information Empowerment • Employee and Customer

Production-line Approach to Service Design Limit Discretion of Personnel Division of Labor Substitute Technology for People Standardize the Service

Customer Participation Encourage Co-production by Customer Free air miles for Internet ticketing Promote Demand Smoothing Half-price drinks before 6:00pm

Customer Contact View of Services Degree of Customer Contact Influences Potential Efficiency of Service Separate High- and Low-Contact Operations Consider Sales Opportunity and Production Efficiency Tradeoff

Service-System Design Matrix Degree of customer/server contact Buffered Permeable Reactive High core (none) system (some) system (much) Low Face-to-face total customization Face-to-face loose specs Sales Opportunity Production Efficiency Face-to-face tight specs Phone Contact Internet & on-site technology Mail contact Low High

Information Empowerment Employees Relational Databases Customers Internet Web Site

Discussion Questions What ethical issues are raised in the promotion of sales during a service transaction? What are some drawbacks of customer participation in the service delivery process? 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.

100 Yen Sushi House Questions Prepare a service blueprint for the 100 Yen Sushi House 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.

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

100 Yen Sushi House Service Package Supporting Facility Facilitating Goods Information Explicit Service Implicit Service

INTERACTIVE CLASS EXERCISE The class breaks into small groups and prepares a service blueprint for Village Volvo.