New Service Development

and Process Design

Customer Benefit Package
Hierarchy Element Core Good Core Service
Level Example Example

Category Business Custom Business

clothier hotel

First Core Business Room for

suits the night

Second Peripheral Garment Bath robe

Good bag

Peripheral Deferred In house

Service payment restaurant
plans
Third Variant Coffee Airport
lounge 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 Enablers Development

• Formulation

l
nte na
Co iz atio of new services
objective / strategy
People
xt

Te
• Idea generation
• Service design
n

am
ga

and screening
and testing

s
Or

• Concept
• Process and system
development and
design and testing Product
• Marketing program testing
design and testing
• Personnel training Technology Systems
• Service testing and
pilot run
• Test marketing Tools

Design Analysis
• 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
Standard Brush Apply Collect
execution time Buff
shoes polish payment
2 minutes
30 30 45 15
secs secs secs secs
Total acceptable
execution time
Wrong
5 minutes
color wax
Clean Fail
shoes point Materials
Seen by
(e.g., polish, cloth)
customer 45
secs

Line of Not seen by

visibility customer but Select and
necessary to purchase
performance supplies
Service Blueprinting
(Bank Lending Operation Example)
Loan application Branch Officer Pay book
30min--1hr.
===
==== ===== $ 0 $ ==== =====
====
w
w
Line of visibility
Receive Final
Decline Notify Payment payment
customer
Issue
F Confirm
Deny check F
Verify
Print
income Credit Close
Accept payment Delinquent
data check account
book
Initial 1 day 2 days 3 days F
screening
Confirm

Verify
payer
Employer Credit
F Branch
bureau
records
Bank F
accounts F
Accounting
Data base
records

F
Fail point W Customer wait Employee decision
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

No Reservations TAKE RESERVATION Specific Table Selection

Self-seating. Menu on Blackboard SEAT GUESTS, GIVE MENUS Recite Menu: Describe Entrees & Specials
Eliminate SERVE WATER AND BREAD Assortment of Hot Breads and Hors D’oeuvres
Customer Fills Out Form TAKE ORDERS At table. Taken Personally by Maltre d’
PREPARE ORDERS

Pre-prepared: No Choice Salad (4 choices) Individually Prepared at table

Limit to Four Choices Entree (15 choices) Expand to 20 Choices: Add Flaming Dishes;
Bone Fish at Table; Prepare Sauces at Table
Sundae Bar: Self-service Dessert (6 choices) Expand to 12 Choices

Coffee, Tea, Milk only Beverage (6 choices) Add Exotic Coffees; Sherbet between
Serve Salad & Entree Together: SERVE ORDERS Courses; Hand Grind Pepper
Bill and Beverage Together

Cash only: Pay when Leaving COLLECT PAYMENT 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
Sales loose specs Production
Face-to-face
Opportunity tight specs Efficiency
Phone
Internet & Contact
on-site
Mail contact technology

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.
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.