New Service Development and Process Design

Customer Benefit Package

Hierarchy Level Category First Second Element Core Good Example Custom clothier Business suits Garment bag Deferred payment plans Coffee lounge Core Service Example Business hotel Room for the night Bath robe Business Core Peripheral Good Peripheral Service Third Variant

In house restaurant Airport shuttle

Learning Objectives

Discuss the new service development process. Prepare a blueprint for a service operation. Describe a service process using the dimensions of divergence and complexity. Use the taxonomy of service processes to classify a service operation. Compare and contrast the generic approaches to service system design. Place an example of service automation in it proper category. Discuss the managerial issues associated with the adoption of new technology.

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

New Service Development Cycle

Full-scale launch Post-launch review

Full Launch

Enablers

Development
Formulation of new services objective / strategy Idea generation and screening Concept development and testing

People
Service design and testing Process and system design and testing Marketing program design and testing Personnel training Service testing and pilot run Test marketing

Product

Technology
Tools

Systems

Design

Analysis
Business analysis Project authorization

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

Classification of Service Automation

Fixed-sequence

(F) - parking lot gate Variable-sequence (V) - ATM Playback (P) - answering machine Numerical controlled (N) - animation Intelligent (I) - autopilot Expert system (E) - medical diagnosis Totally automated system (T) - EFT

Adoption of New Technology in Services

Challenges

of Adopting New Technology The Process is the Product Back Office vs Front Office Changes Need for Standardization Managing the New Technology Adoption Process Ten step process with concern for employees and customers

Example of Service Blueprinting

Standard execution time 2 minutes Total acceptable execution time 5 minutes Brush shoes 30 secs Apply polish 30 secs Buff 45 secs Wrong color wax Materials (e.g., polish, cloth) Collect payment 15 secs

Seen by customer

Clean shoes 45 secs

Fail point

Line of visibility

Not seen by customer but necessary to performance

Select and purchase supplies

Service Blueprinting
(Bank Lending Operation Example)
Loan application Branch 30min--1hr.
=== ==== ==== w

Officer

Pay book

=====

$ 0 $ w

====

=====

Line of visibility
Decline F Verify income data Initial screening 1 day Notify customer Deny Credit check 2 days Receive Payment Final payment

Issue check
Print payment book

Confirm

F Close account

Accept 3 days

Delinquent F Verify payer

Employer
Bank accounts Data base records

Credit bureau F

Branch records
Accounting F

Fail point

Customer wait

Employee decision

Service Blueprint of Luxury Hotel

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.

Structural Alternatives for a Restaurant

LOWER COMPLEXITY/DIVERGENCE
No Reservations Self-seating. Menu on Blackboard Eliminate Customer Fills Out Form

CURRENT PROCESS
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

HIGHER COMPLEXITY/DIVERGENCE
Specific Table Selection Recite Menu: Describe Entrees & Specials Assortment of Hot Breads and Hors Doeuvres At table. Taken Personally by Maltre d

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

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

COLLECT PAYMENT

Choice of Payment. Including House Accounts: Serve Mints

Structural Positioning of Healthcare Services

HIGH COMPLEXITY * Forensic-Testing Lab

* Hospitals Services * General Practitioner: Diagnosis & Treatment

* Diagnostic services only Specialist: * Treatment only HIGH DIVERGENCE Outpatient Clinic: Limited * Treatment: e.g. Broken Bones/Minor Burns only

LOW DIVERGENCE

* Retailer of Orthopedic Supplies * X-Ray Lab * Medical Counseling

LOW COMPLEXITY

Taxonomy of Service Processes

No Customer Contact Low divergence (standardized service) Processing Processing of goods Information Dry Check Cleaning processing Restocking Billing for a a vending credit card machine Ordering groceries from a home computer No customerservice worker interaction (selfservice) Customer service worker interaction Operating a vending machine Assembling premade furniture Food service in a restaurant Hand car washing Withdrawing cash from an ATM Processing of people High divergence (customized service) Processing Processing of goods Information Auto repair Computer Tailoring a programming suit Designing a b uilding Supervision of a landing by an air controller Operating Sampling Documenting an elevator food at a medical Riding an buffet dinner history escalator Bagging of groceries Searching for information in a library Providing Home Portrait public carpet painting transportcleaning Counseling a tion Landscaping Providing service mass vaccination Driving a rental car Using a health club facility Processing of people

Indirect customer contact

Direct Customer Contact

Giving a lecture Handling routine bank transactions

Haircutting Performing a surgical operation

Generic Approaches to Service Design

Production-line Limit Discretion of Personnel Division of Labor Substitute Technology for People Standardize the Service Customer as Coproducer Substitution of Customer Labor for Provider Smoothing Service Demand Customer Contact Degree of Customer Contact Separation of High and Low Contact Operations Information Empowerment Employee and Customer

Production-line Approach to Service Design

Limit

Discretion of Personnel
of Labor Technology for People the Service

Division

Substitute

Standardize

Customer Participation
Encourage

Co-production by Customer Free air miles for Internet ticketing

Promote Demand Smoothing Half-price drinks before 6:00pm

Customer Contact View of Services

Degree

of Customer Contact Influences Potential Efficiency of Service High- and Low-Contact Operations Sales Opportunity and Production Efficiency Tradeoff

Separate

Consider

Service-System Design Matrix

Degree of customer/server contact High
Buffered core (none) Permeable system (some) Reactive system (much)
Face-to-face total customization

Low

Sales Opportunity
Internet & on-site Mail contact technology Phone Contact

Face-to-face loose specs Face-to-face tight specs

Production Efficiency

Low

High

Information Empowerment
Employees

Relational Databases

Customers

Internet Web Site

Discussion Questions
What

ethical issues are raised in the promotion of sales during a service transaction? What are some drawbacks of customer participation in the service delivery process? What are the limits in the production-line approach to service? Give an example of a service in which isolation of the technical core would be inappropriate.

INTERACTIVE CLASS EXERCISE

The class breaks into small groups and prepares a service blueprint for Village Volvo.