New Service Development

and Process Design

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.
 New Service Development Cycle
• Full-scale launch
• Post-launch
review

Full Launch Enablers Development

• Formulation

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nte na
of new services

Co izatio
People objective / strategy

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Te
• Idea generation

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ga
and screening

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Or

• Concept
Product development and
testing
• Service design
and testing Technology Systems
• Process and system
design and testing
• Marketing program Tools
design and testing
Design Analysis
• Personnel training
• Service testing and • Business analysis
pilot run • Project
• Test marketing authorization
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
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
Service Blueprint of Luxury Hotel
Blending Blueprinting with Lean
Womack and Jones, “Lean Consumption”, HBR March 2005.

• Principles of Lean Consumption:

1. Solve the customer’s problem completely by ensuring that all the
goods and services work, and work together
– Home: search, find, purchase, maintain, repair, upgrade
– Cell phone: calling, pda, pictures, music, hot synch., downloads, internet…
1. Don’t waste the customer’s time
– Enhanced blueprint: add value-creating, and wasted time for customer and
provider. Calculate total time and % value added.
1. Provide exactly what the customer wants
– Prevent stockouts from long supply chains
– Nike’s custom bags from NuSewCo in San Francisco
1. Provide what’s wanted exactly where it’s wanted
– Offer services through all desired channels, on-line, local, big-box,
phone…
1. Provide what’s wanted where it’s wanted exactly when it’s wanted
– Sometimes this may be some time off. Could I get it customized merely by
sharing plans?
1. Continually aggregate solutions to reduce the customer’s time and
hassle.
– One stop for the really big problems: mobility, communications, shelter,
health care, financial management, shopping.
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 CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE

No Reservations TAKE RESERVATION Specific Table Selection

Self-seating. Menu on Blackboard SEAT GUESTS, GIVE MENUS Recite Menu: Describe Entrees & Specials
Eliminate SERVE WATER AND BREAD Assortment of Hot Breads and Hors D’oeuvres
Customer Fills Out Form TAKE ORDERS At table. Taken Personally by Maltre d’
PREPARE ORDERS

Pre-prepared: No Choice Salad (4 choices) Individually Prepared at table

Limit to Four Choices Entree (15 choices) Expand to 20 Choices: Add Flaming Dishes;
Bone Fish at Table; Prepare Sauces at Table
Sundae Bar: Self-service Dessert (6 choices) Expand to 12 Choices

Coffee, Tea, Milk only Beverage (6 choices) Add Exotic Coffees; Sherbet between
Serve Salad & Entree Together: SERVE ORDERS Courses; Hand Grind Pepper
Bill and Beverage Together

Cash only: Pay when Leaving COLLECT PAYMENT Choice of Payment. Including House Accounts:
Serve Mints
Taxonomy of Service Processes
Degree of Customer Low Divergence (Standardized Service) High Divergence (Customized Service)
Contact
Processing of Processing of Processing of Processing of Processing of Processing of
Goods Information or People Goods Information or People
Images Images

No Customer Contact Dry cleaning Check Auto repair Computer

Restocking a processing Tailoring a suit programming
vending machine Billing for a Designing a
credit card building

Indirect Customer Contact Ordering Supervision of a

groceries from a landing by an air
home computer controller
Phone-based Bidding at a TV
account balance auction
verification

Direct No customer- Operating a Withdrawing Operating an Sampling food at Documenting Driving a rental
Customer service worker vending machine cash from an elevator a buffet dinner medical history car
Contact interaction (self- Assembling pre- automatic bank Riding an Bagging of at a clinic Using a health
service) made furniture teller escalator groceries Searching for club facility
Taking pictures information in a
in a photo booth library

Customer- Food serving in Giving a lecture Providing public Home carpet Portrait painting Haircutting
service worker a restaurant Handling routine transportation cleaning Counseling Performing a
interaction Car washing bank Providing mass Landscaping surgical
transactions vaccination service 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
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.
Commuter Cleaning - New Venture Proposal

1. Prepare a service blueprint for Commuter

Cleaning.
2. What generic approach to service design is
illustrated by Commuter Cleaning, and what
competitive advantage does this offer?
3. Using the data in Table 4.6 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.
4. Critique the business concept, and make
recommendations for improvement.
100 Yen Sushi House Questions
• Prepare a service blueprint for the 100 Yen Sushi
House
• What features differentiate 100 Yen Sushi House
and how do they create a competitive advantage?
• How has the 100 Yen Sushi House incorporated
the just-in-time system into its operations?
• Suggest other services that could adopt the 100
Yen Sushi House service delivery concept.
100 Yen Sushi House Layout

Dishwashing Counter in Back

CONVERSATION AREA
Miso and Tea Station

CONVEYOR
BELT

CONVERSATION AREA
TAKE-OUT
POSITION

ENTRANCE = CHEF
100 Yen Sushi House Service Package

• Supporting Facility

• Facilitating Goods

• Information

• Explicit Service

• Implicit Service
INTERACTIVE CLASS EXERCISE

The class breaks into small groups and

prepares a service blueprint for Village
Volvo.