1. Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin New Service Development

2. 4-2 1. Discuss the new service development process. 2. Prepare a blueprint for a service operation. 3. Describe a service process using the dimensions of divergence and complexity. 4. Use the taxonomy of service processes to classify a service operation. 5. Compare and contrast the generic approaches to service system design. Learning Objectives

3. 4-3 Designing a Service System Designing a service system – some issues to reckon 1. Location 2. Facility design and layout for effective customer and employee workflow 3. Processes for the provided services 4. Developing Key performance indices – includes measures for ensuring quality 5. Extent of customer involvement 6. Adequate service capacity 7. Tradeoff between cost and quality of service (includes equipment selection).

4. 4-4 New Service Development New service development involves innovation. Innovation is viewed as 1. Process creating something new and 2. The actual product or outcome (modification to an existing service) Service innovations can be classified as: 1. Radical Innovations 2. Incremental Innovations

5. 4-5 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

6. 4-6 Technology Driven Service Innovation Technological advances often are the basis for radical service innovation. Illustrations of Technology-drive innovations are:  Power/energy - International flights with jet aircraft  Physical design - Enclosed sports stadiums  Materials - Astroturf  Methods - JIT and TQM  Information - E-commerce using the Internet

7. 4-7 Service Design Elements  Structural - Delivery system - Facility design - Location - Capacity planning  Managerial - Service encounter - Quality - Managing capacity and demand - Information

8. 4-8 People Technology Systems Product Full Launch Development Design Analysis Organizational Context Teams Tools Enablers 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 New Service Development Cycle

9. 4-9 Service Design Elements Structural 1. Delivery System (Front and back Office) 2. Facility Layout (Size, layout, etc) 3. Location (Single, Multiple sites, etc.) 4. Capacity Planning (Managing queues, number of servers, average or peak demand, etc.) Managerial 1. Service encounter (Culture, selection and training, employee empowerment, etc) 2. Quality (Measurement, Monitoring, expectations vs. perceptions, etc.) 3. Managing Capacity and demand (Strategies for altering demand and controlling supply, etc) 4. Information (Competitive Resource, Data Collection)

10. 4-10 Service Blueprint of Luxury Hotel

11. 4-11 1. Degree of Complexity: Measured by the number of steps in the service blueprint. For example a clinic is less complex than a general hospital. 2. 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. These two dimensions are used to create the market- positioning chart. Strategic Positioning Through Process Structure

12. 4-12 LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE 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 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 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 Structural Alternatives for a Restaurant

13. 4-13 Taxonomy of Service Processes

14. 4-14  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

15. 4-15 Customer Value Equation