1. KNOWLEDGE, INNOVATION & NEW PRODUCT DEVELOPMENT 2UZB614
Lecture-1
KNOWLEDGE, INNOVATION & NEW PRODUCT DEVELOPMENT 2UZB614
Mamurjon Rahimov and
Farhod Karimov
Academic year
TW-6

2. New service innovation

4. New service development (NSD)
Introduction
Growth in services
Technology and new services
Characteristics of services
Customer relationship process
New service innovations
NSD process
Summary & recap

5. Introduction Growth in services Characteristics of services
Services are processes where customer is part of it
Viewed differently to products
Services contribute to new business models:
eBay new way of conducting business
Ryanair new way of flying
Amazon new way of viewing and buying books
iTunes new way to buy music

6. Categories of service mix
Pure tangible good
Tangible good with accompanying services
Hybrid
Major service with accompanying minor goods and services
Pure service

7. Growth in services – but what does this mean?
Within the EU services now account for more than
60% of GDP.
huge growth in coffee bars,
smoothie bars and hair salons?
Growth in knowledge intensive
business services (KIBS)
Since 2003, shares in oil
companies have doubled.
Halliburton and Schlumberger, the world market leader for oil services,
have more than tripled.

8. Outsourcing and service growth
Expected gains that companies can derive from outsourcing include:
the reduction of operational costs;
the ability to transform fixed costs into variable costs;
the ability to focus on core competencies;
access to the industry-leading external competencies and expertise.

9. Typology of services Business-to- business services (traditional)
Business-to- business services (KIBS)
Consumer services
Internal firm services
Public services
Not-for-profit services
Description
Services provided for businesses
Specialist services provided to businesses
Services provided to individuals
Services provided by internal functions
Services provided by local and national government
Services provided by charities
Examples
Accountancy
Legal advice
Training
Management consultancy
IT consultancy
Shops
Hotels
Banking
Health and beauty
Finance
Personnel IT
Health
Education
Leisure
Prisons
Hospices
Counseling
Aid agencies
Customers
Frequently purchased by professionals, who may not be end users
Purchased by consumer of the service
Consumers of the service have no choice of provider
Funded through taxation and little choice for consumer
Funded through charities maybe government grants consumers chosen or choose.
Challenges
Providing high-quality tailored and personal service
Providing high quality services to businesses who have high purchasing power
Providing a consistent service to a wide variety of customers
Delivering customized, personal service. And demonstrating value for money.
Delivering acceptable public services against a backcloth of political pressures.
Balancing needs of volunteers, donors and overwhelming needs of customers.

10. A range of new services that also create new business models, where technology plays a key role
Company
Industry sector
New service/new business model
eBay
On-line auction
A new way of buying and selling through a
community of individual users
Ryanair
Airline
A new way of consuming air-travel with no frills
service and emphasis on economy
Amazon
Retailer
New way to buy goods – on-line retailer
iTunes
Music retailer
New way to buy and download music
Google
Internet search
engine
A fast way to search for information on the
internet
Facebook
Social networking
A community of users on-line who can chat and share music, images, news from their own home
You-Tube
On-line video and
film archive
A community of users sharing home made video clips plus recorded favourite clips from movies

11. Characteristics of Services
Services are
co-produced
by the customer
Services are
heterogeneous
Services are
intangible
Services are
processes
Services are
produced and
consumed
simultaneously
Services are
perishable
Services cannot
be transported

12. The customer relationship process
Service
quality
Service
value
Services
marketing
Customer
value
Customer
retention
Relationship
quality
Customer
satisfaction

13. New service innovation
As with products, service innovations can be classified
in many ways:
eBay was new to the market; Google’s on-line auction is new to Google;
Internal process innovations, e.g. Amazon: delivering books to consumer is not new, but using internet;
Line extensions to services, e.g. banks offering insurance;
Service modifications, e.g internet access to airline passengers.

14. Typology for innovations (Ozdemir, 2007)
Booz et al. (1982)
Lovelock (1984)
New to the world products: new products that not only represent a major new challenge to the supplier, but which are also seen to be quite new in the eyes of customers
Major innovation: new services for markets as yet undefined; innovations usually driven by information and computer-based technologies
New product lines: new products which represent major new challenges to the supplier
Start-up business: new services in a market that is already served by existing services
Additions to existing product lines: new products that supplement a company’s established product lines, so rounding out the product mix
New services for the market presently served: new service offerings to existing customers of an organisation (although the services may be available from other companies)
Improvements and revisions to existing products: new products that provide improved performance and so replace existing products
Service line extensions: augmentations of the existing service line such as adding new menu items, new routes and new courses
Repositionings: existing products that are targeted to new markets or market segments
Service improvements: changes in feature of services that currently are being offered
Cost reductions: new products that provide similar performance at a lower cost of supply
Style changes: the most common of all “new services”; modest forms of visible changes that have an impact on customer perceptions, emotions and attitudes, with style changes that do not change the service fundamentally, only its appearance

15. Customer roles in NPD (Nambisan, 2002)
NPD phase
Customer as resource
Ideation
Customer as co-creator
Design and development
Customer as user
Product testing
Product support
Key Issues/Managerial Challenges
Appropriateness of customer as a source of innovation
Selection of customer innovator
Need for varied customer incentives
Infrastructure for capturing customer knowledge
Differential role of existing (current) and potential (future) customers
Involvement in a wide range of design and development tasks
Nature of the NPD context: industrial/consumer products
Tighter coupling with internal NPD teams
Managing the attendant project uncertainty
Enhancing customers' product/technology knowledge
Time-bound activity
Ensuring customer diversity
Ongoing activity
Infrastructure to support customer-customer interactions

16. The service innovation process
Different from NPD: customer is part of the process
Blueprinting the service
Identify every activity and every possible
outcome in the process
‘Prick-eared’ market research
Direct contact facilitates dialogue
Service prototypes
Difficult because customer is part of process
Level of integration determines ability to prototype
E.g. a doctor’s home visit
a visit to the cinema

17. Customer interaction process
Determinants
Service
encounter
Service
provider
Customer
Customer roles
Encounter
management
Critical incidents

18. How do customers evaluate services?
Perceived service quality . . .
Perceived service value . . .
Customer expectations . . .
Reliability
Responsiveness
Assurance
Empathy
Tangibles

19. Reliability
Providing service as promised
Dependability in handling customers’ problems
Performing services right first time
Performing services at the promised time
Maintaining error free records
Responsiveness
Keeping customer informed when service will be performed
Prompt service to customers
Willingness to help customers
Readiness to respond to customers’ requests
Assurance
Employees who instil confidence in customers
Making customers feel safe in their transactions
Employees who are consistently courteous
Employees who have knowledge to answer questions

20. Empathy
Giving customers individual attention
Employees who deal with customers in a caring manner
Having the customers best interests at heart
Employees who understand the needs of their customers
Convenient business hours
Tangibles
Modern equipment
Visually appealing facilities
Employees who have neat, professional appearance
Visually appealing materials associated with service

21. New service innovation
For many years the literature overlooked this concept!
Innovation deemed to require a new physical “thing”
But, the world of business suggested new services could deliver even more significant changes (new business models):
First Direct
Ryanair
eBay
Apple’s iTunes

22. Recommended Reading Essential Reading Recommended Reading
Trott, P. (2012) Innovation Management & New Product Development. FT Prentice Hall.
Recommended Reading
Davis, S.M. & Moe, K. (1997). Bringing innovation to life. Journal of Consumer Marketing, 14 (5),
Kao, S-C., Wu, S-H. & Su, P-H. (2011). Which mode is better for knowledge creation? Management Decision, 49 (7),
Mitchell, R. & Boyle, B. (2010). Knowledge creation measurement methods. Journal of Knowledge Management, 14 (1),
Witell, L., Kristensson, P., Gustafsson, A. & Löfgren, M. (2011). Idea generation: customer co-creation versus traditional market research techniques. Journal of Service Management, 22 (2),
Yelkur, R. & Herbig, P. (1996). Global markets and the new product development process. Journal of Product and Brand Management, 5 (6),
KNOWLEDGE, INNOVATION & NEW PRODUCT DEVELOPMENT