1. New Service Development and Process Design

2. 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.

3. 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 

4. 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

5. Technology-Driven Service Innovations
Source of Technology
Service Example
Service Industry Impact
Power/energy
Jet aircraft
Nuclear energy
International flight is feasible
Less dependence on fossil fuel
Facility design
Hotel atrium
Enclosed sports stadium
Feeling of grandeur/spaciousness
Year-around use
Materials
Photochromic glass
Synthetic engine oil
Energy conservation
Fewer oil changes
Methods
Just-in-time (JIT)
Six Sigma
Reduce supply-chain inventories
Institutionalize quality effort
Information
E-commerce
Satellite TV
Increase market to world-wide
Alternative to cable TV
3-5

6. Challenges for Service Innovation
Ability to protect intellectual and property technologies
Incremental nature of innovation
Degree of integration required
Ability to build prototypes or conduct tests in a controlled environment
3-6

7. 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
Readiness to Embrace New Technology

8. Service Design Elements
Topics
Structural
Delivery system
Process structure, service blueprint, strategic positioning
Facility design
Servicescapes, architecture, process flows, layout
Location
Geographic demand, site selection, location strategy
Capacity planning
Strategic role, queuing models, planning criteria
Managerial
Information
Technology, scalability, use of Internet
Quality
Measurement, design quality, recovery, tools, six-sigma
Service encounter
Encounter triad, culture, supply relationships, outsourcing
Managing capacity and demand
Strategies, yield management, queue management

9. Customer Value Equation
3-9

10. 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.

11. 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

12. 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

13. Example of Service Blueprinting

14. Service Blueprinting (Bank Lending Operation Example)
Loan application Branch Officer Pay book
30min--1hr.
Line of visibility
Deny
1 day days 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

15. Service Blueprint of Luxury Hotel

16. 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

17. 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

18. Service Fail-safing Poka-Yokes (A Proactive Approach)
Keeping a mistake from becoming a service defect.
How can we fail- safe the three Ts?
Task
Tangibles
Treatment

19. Have we compromised one of the 3 Ts?

20. 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

21. 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

22. 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.