1. New Service Development
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Innovation in Services
Basic Research: Pursue a planned search for new knowledge regardless of possible application.
Applied Research: Apply existing knowledge to problems in creation of new service.
Development: Apply knowledge to problems to improve a current service.
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3. 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.
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4. Levels of Service Innovation
Radical Innovations
Major Innovation: new service that customers did not know they needed.
Start-up Business: new service for underserved 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 service delivery process (e.g. self-service boarding kiosk).
Style Changes: modest visible changes in appearances.
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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
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6. New Service Development Cycle
Full-scale launch
Post-launch review
Full Launch
Development
Enablers
Formulation
of new services
objective / strategy
Idea generation
and screening
Concept
development and
testing
Organizational
Context
People
Service design
and testing
Process and system
design and testing
Marketing program
Personnel training
Service testing and
pilot run
Test marketing
Teams
Product
Technology
Systems
Tools
Analysis
Design
Business analysis
Project authorization
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7. Service Blueprint of Luxury Hotel
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8. 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.
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9. 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
Salad Bar
Entree (6 choices)
Dessert (6 choices)
Beverage (6 choices)
SERVE ORDERS
CASH OR CREDIT CARD
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’
Salad (4 choices)
Expand to 10 Choices: Add Flaming Dishes;
Bone Fish at Table
Expand to 12 Choices
Add Exotic Coffees; Wine list, Liqueurs
Separate-courses; Hand Grind Pepper
Choice of Payment. Including House Accounts:
Serve Mints
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10. 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
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11. Customer Value Equation
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12. COMMUTER CLEANING
A New Venture Proposal
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13. Commuter Cleaning: New Venture Proposal
Prepare a service blueprint for Commuter Cleaning.
What generic approach to service design is illustrated by Commuter Cleaning, and what competitive advantage does this offer?
Using the data in Table 4.7 calculate a break-even price per shirt if monthly demand is expected to be 20,000 shirts and the contract with a cleaning plant stipulates a charge of $0.50 per shirt.
Critique the business concept, and make recommendations for improvement.
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14. Service Blueprint
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15. Breakeven Analysis Fixed Expenses = (Demand)(Price-Charge) $13,404
= (13, ,000)/20,000
= $1.17
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