New Service Development: Initiation Strategies Authors: David Kelly Chris Storey Presenter: Jared Weber

What’s the Purpose? There is plenty of information on NPD (New Product Development) there is really nothing on the NSD ( New Service Development). Investigate how, and what extent, service firms plan their search for new services. Address the general approach service firms have for NSD The strategies used in choosing potential new service projects.

Previous Work? None! No detail of previous studies. There is plenty of work on the NPD but none on the NSD Businesses are just now starting to realize the importance of NSD

Idea Generation Evolves inside and outside the firm, formal and informal search procedures (Cowell,1988) Coming up with Ideas is relatively easy, businesses tend not to engage in formal idea generation (Easingwood, 1986) Whether new product strategy actually constrains the search for new ideas? (Moore,1987) Techniques for stimulating ideas must be created and maintained on an ongoing basis to keep generating innovations (Crawford, 1994)

Idea generation cont. The techniques should be embraced by the whole firm (Vandermerwe, 1987) Front-line personnel did not appear to play a significant role in the early stages of NSD (Brentani,1991) Increased work load (Easingwood, 1986) Competitors have been identified as a more important source of ideas than customers. (Easingwood, 1996) 80% of banks view their competitors as main source of new product ideas (Teixeria and Ziskin,1993)

Screening Allocate resources between projects which most likely would help the firm meet its objectives? Can be a single activity or multi-stage, can be quantitative or qualitative. Done at the early stages of NSD, therefore a shortage of hard facts. Should be refined to reflect the firm (Choffray and Lillien, 1980) Decisions will always be plagued by a high degree of uncertainty and subjectivity. (Cooper,1981) Hidden cost to failure; managerial effort wasted, corporate image, missed opportunities for new products.

Aim of the research Investigate whether service firms use systematic procedures to generate and screen ideas for new services.

Research Method Questionnaire given to Leading UK service firms in five different sectors. (Banking, Telecommunications, Insurance, Transportation and Media) Sent to marketing personnel Followed by interviews.

Research Cont. 43 executives respond from a sample of 154. Response rate of 28% 57% marketing/product development directors 21% marketing or product managers 21% general management positions

Questionnaire New products were defined as: 1.Core products that are new-to-the-world or new to the company. 2.Core products that are improvements over existing products. 3.Supplementary and value-added services.

Results Respondents asked to categorize themselves according to the Miles and Snow (1978) approaches to innovation (1) Prospector. Values being "first" with new products, markets and technologies. (2) Analyzer. Seldom first to market, but frequently a fast follower with a more cost-efficient or innovative product (3) Defender. Locates and maintains a secure niche by protecting their position in a relatively stable product or service area. (4) Reactor. Responds to product and market changes only when forced by environmental pressures.

Key Barriers to Effective Service Development in a Firm

Idea Generation Starting Point 3 new questions 1. Whether new product ideas were generated continuously or just needed 2. Whether the firm has a formal idea search methodology 3. Whether the idea search methodology is documented

Open Question Criteria used to evaluate new product ideas? 74 different criteria Categorized into five common themes.

Findings NSD is risky yet the revenue is good for those who use it. Firms will find it difficult to generate new project proposals to remain competitive if NSD is not implemented Need for the development of systems and processes that stimulate idea generation in a firm Main barrier to innovation in service firms is the lack of expertise within the firm. Marketing Department is the source for large percentage of new service ideas Operations and Customer Service personnel are not actively involved as they should be.

Findings Found idea screening to be carried out more systematically than idea generation and basing their decision to proceed on financial criteria. Lack of resources is a common barrier to NSD. Result in spreading resources too thin. Need to pick projects that can be effectively carry out with the resources available.

Further Research Identify the relevance of different NSD process models for different types of services and in different industrial settings.

Conclusion NSD is an informal processes compared to NPD. Firms are missing out of opportunities Few firms systematically involve contact or operations staff in the process (Goes against services marketing theory) Screening process needs to be improved to pick winners and prioritize projects. Service firms are not satisfied with their ability to develop new services.