Chapter 04 New Service Development Mc GrawHillIrwin Service

Chapter 04 New Service Development Mc. Graw-Hill/Irwin Service Management: Operations, Strategy, and Information Technology, 6 e Copyright © 2008 by The Mc. Graw-Hill Companies, Inc. All Rights Reserved.

Learning Objectives n n n n n Describe the challenges of service innovation. Describe the new service development process/cycle. Describe the components of the customer value equation. Explain and differentiate what is meant by the divergence and the complexity of a service process. Compare and contrast the four approaches to service system design: production-line, customer as coproducer, and information empowerment. Describe the generic techniques to service design Service blueprint example. Prepare a blueprint for a service operation. Explain the difference between direct and indirect customer contact. 4 -2

Challenges for Service Innovation n n 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. 4 -3

New Service Development Process Idea generation Suppliers R&D Marketing Product or service concept Feasibility study Form design Customers Competitors Performance specifications Revising and testing prototypes Production design Functional design New product or service launch Final design & process plans Design specifications Pilot run and final tests Manufacturing or delivery specifications

New Service Development Cycle • Full-scale launch • Post-launch review Full Launch ga n Co izatio nte na l xt Or s am Design People Te • Service design and testing • Process and system design and testing • Marketing program design and testing • Personnel training • Service testing and pilot run • Test marketing Development Enablers Product Technology • Formulation of new services objective / strategy • Idea generation and screening • Concept development and testing Systems Tools Analysis • Business analysis • Project authorization 4 -5

Strategic Positioning Through Process Structure n n 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. 4 -6

Structural Alternatives for a Restaurant LOWER COMPLEXITY/DIVERGENCE No Reservations Self-seating. Menu on Blackboard Eliminate Customer Fills Out Form Pre-prepared: No Choice CURRENT PROCESS TAKE RESERVATION SEAT GUESTS, GIVE MENUS SERVE WATER AND BREAD TAKE ORDERS Salad Bar Limit to Four Choices Entree (6 choices) Sundae Bar: Self-service Dessert (6 choices) Coffee, Tea, Milk only Serve Salad & Entree Together: Bill and Beverage Together Cash only: Pay when Leaving Beverage (6 choices) SERVE ORDERS CASH OR CREDIT CARD HIGHER COMPLEXITY/DIVERGENCE 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 4 -7

Taxonomy of Service Processes Low divergence (standardized service) Processing of goods Information Dry Check Cleaning processing Restocking Billing for a a vending credit card machine Ordering groceries from a home computer No Customer Contact Indirect customer contact Direct Customer Contact 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 Giving a lecture Handling routine bank transactions Processing of people High divergence (customized service) Processing of goods Information Auto repair Computer Tailoring a programming suit Designing a building Processing of people Supervision of a landing by an air controller Operating an elevator Riding an escalator Sampling food at a buffet dinner Bagging of groceries Providing Home public carpet transit cleaning Mass Landscaping vaccination service Documenting medical history Searching for information in a library Portrait painting Counseling Driving a rental car Using a health club facility Haircutting Performing a surgical operation 4 -8

Generic Approaches to Service Design n n 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 4 -9

Discussion Questions n n n 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. 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? Go to http: //www. oecd. org/home and find the current non-manufacturing share of total business R&D for the countries listed in Table 1. 1. Are there any surprises? 4 -10

Generic Service Design Techniques n Simplification n Standardization n Modularity

Customer Value Equation 4 -12

Service Blueprint n n A type of process flowchart that emphasizes customer interaction and service related items such as failure points and lines of visiblity. Why?

Service Blueprint of Luxury Hotel 4 -14

Service Blueprint for an Installment Lending Operation Source: Lynn Shostack, “Service Positioning through Structural Change, ” Journal of Marketing 51 (January 1987), p. 36. Reprinted with permission by the American Marketing Association

100 Yen Sushi House 1. 2. 3. 4. 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. 4 -16

100 Yen Sushi House Layout Dishwashing Counter in Back CONVERSATION AREA Miso and Tea Station CONVEYOR BELT CONVERSATION AREA TAKE-OUT POSITION ENTRANCE = CHEF 4 -17