New Service Development and Process Design

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

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

New Service Development Cycle 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 People Technology Systems Product Organizational Context Teams Tools Enablers DevelopmentFull Launch Design Analysis

The Service Package Supporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane. Facilitating Goods: The material purchased or consumed by the buyer or items provided by the consumer. Examples are food items, auto parts, legal documents, golf clubs. Information: Data of information that is provided by the customer to enable efficient and customized service. Examples patient medical records, customer preferences from prior visit. Explicit Services: Benefits readily observable by the senses. The essential or intrinsic features. Examples are quality of meal, attitude of the waiter, on-time departure. Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only vaguely. Examples are privacy of loan office, security of a well lighted parking lot.

Service Design Design Specifications Delivery Specifications Performance Specifications

Service Design

Service System Design Tools Service Blueprinting –Design tool based on the process flow diagram Delineate front office from back office operations Determine standard or maximum execution times, materials and the exact process for each step Identify potential failure points and generate mitigation plans to prevent or recover from a failure

Service Blueprint Components

Driver Picks Up Pkg. Dispatch Driver Airport Receives & Loads Sort Packages Load on Airplane Fly to Destination Unload & Sort Load On Truck Express Mail Delivery Service SUPPORT PROCESS CONTACT PERSON (Back Stage) (On Stage) CUSTOMER PHYSICAL EVIDENCE Customer Calls Customer Gives Package Truck Packaging Forms Hand-held Computer Uniform Receive Package Truck Packaging Forms Hand-held Computer Uniform Deliver Package Customer Service Order Fly to Sort Center Line of Interaction Line of Visibility Line of Internal Interaction

Overnight Hotel Stay Hotel Exterior Parking Cart for Bags Uniform Desk Registration Papers Lobby Key Elevators Hallways Room Cart for Bags Room Amenities Bath MenuDelivery Tray Food Appearance Food Bill Desk Lobby Hotel Exterior Parking Arrive at Hotel Give Bags to Bellperson Check in Go to Room Receive Bags Sleep Shower Call Room Service Receive Food Eat Check out and Leave Greet and Take Bags Process Registration Deliver Bags Deliver Food Process Check Out Take Bags to Room Take Food Order Registration System Prepare Food Registration System SUPPORT PROCESS CONTACT PERSON (Back Stage) (On Stage) CUSTOMER PHYSICAL EVIDENCE

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 Contact Degree of Customer Contact Separation of High and Low Contact Operations Information Empowerment Employee Customer Generic Approaches to Service Design

Strategic Positioning Through Process Structure Degree of Complexity 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 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.

Steel production Automobile fabrication House building Road construction Dressmaking Farming Auto Repair Appliance repair Maid Service Manual car wash Teaching Lawn mowing Low service content High goods content High service content Low goods content Increasing goods content Increasing service content Goods-service spectrum

Taxonomy of Service Processes

A Well-designed Service System Is Consistent with firm’s strategic focus User friendly Robust Easy to sustain Effectively linked between front & back office Cost effective Visible to customer

Risk Management in New Product Development Why research and analysis before new product development New product development is linked with very limited historical or preliminary data. Hence, risky Risk can be in form of market, technical, or organizational issues. Risk analysis solves the problem through flexible modeling, primary and secondary research. A good strategy is a must for evaluating and dealing with the associated and unavoidable risks. Research conducted to understand customer needs and develop a new product is different from research required to launch a new product. Product development research is focused on needs of customers while launch research focuses on understanding the motivation and attitudes of early adopters. Successful targeting of early adopters builds the fountain for new product success. New product have a very high failure rates. Products fail, not because of technical shortcomings, but due to absence of market. Over 60% of new product fail before entering the market, and out of the remaining 40% that do see the ray of light, 40% fail to yield profit and are withdrawn from the market. Timely and reliable knowledge about customer preferences is most important. Such data is obtained from business research.