1. Chapter 4 New Service Development

2. Learning Objectives New service development process.
Service blueprinting.
Dimensions of divergence and complexity.
Taxonomy of service processes.
Generic approaches to service system design.

3. Levels of Service Innovation
I. Radical Innovations
Major Innovation
Start-up Business
New Services for the Market Presently Served
II. Incremental Innovations
Service Line Extensions
Service Improvements
Style Changes

4. Technology Driven Service Innovation
Power/energy
Physical design
Materials
Methods
Information

5. Service Design Elements
Structural - Delivery system - Facility design - Location - Capacity planning
Managerial - Service encounter - Quality - Managing capacity and demand - Information

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

7. Service Blueprint of Luxury Hotel

8. Strategic Positioning Through Process Structure
Degree of Complexity
Measured by the number of steps in the service blueprint. (clinic vs. hospital)
Degree of Divergence
Amount of discretion permitted the server to customize the service. (attorney vs. paralegal)

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
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

10. 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

11. Generic Approaches to Service Design
1. Production-line McDonald’s
• Limit Discretion of Personnel mufflers
• Division of Labor MRI tech
• Substitute Technology for People greeting card reorder
• Standardize the Service franchising - Starbucks
2. Customer as Coproducer Pizza Hut buffet • Self Service automatic check-in at airlines • Smoothing Service Demand midweek ski lift discount
3. Customer Contact front office/back office • Degree of Customer Contact laundry at a hospital • Separation of High and Low Contact Operations
Airline reservationists/baggage handler
4. Information Empowerment IT – it’s not just for nerds anymore • Employee cancelled airline flight
• Customer package tracking

12. Customer Value Equation

13. Discussion Questions
What are the limits in the production-line approach to service?
Give examples of a service in which substituting technology for people would be inappropriate.
What are some drawbacks of customer participation in the service delivery process?
What ethical issues are raised in the promotion of sales during a service transaction?