New Service Development Design service delivery system with

New Service Development Design service delivery system with features to differentiate Chap. 03

Distribution of GDP in the US Economy Product Services A Physical B 6% Car, TV Information Publishing, Education, Entertainment 10% 37% 31% Transportation, Retailing Finance (mobile payments) Marketing, Searching 63% 53% C D 16% 84% A = Physical Product, B= Physical Service, C= Digital Product, D= Information Service 3 -2

• Sources of Service Sector Growth – Information technology – The Internet as a service enabler – Innovation – Changing demographics

– Information technology • Ubiquitous computing – Smart phones • Personal banking – Transfer of fund – Payment of bill – Managing personal finance • Healthcare – Off shore radiologist

– The Internet as a service enabler – Wireless connectivity, web 2. 0, social networking • Cost-effective tool to connect customers • Push information to customers

– Innovation • New service developed thru innovation – – A poor adhesive (3 M, Post-it) DVD players (Video rental) Internet streaming (Netflex) WWW (e-commerce, social networking, …) • Unexpected events – The Arab Spring uprising (security evacuation insurance) • Observant contact employee – Hotel concierge observe high demand for taxi » Airport shuttle bus service

• Exploit information available – Sales from auto parts stores » Frequent failures » Performance enhancements • Service lab for testing new service – Burger King » Store replica in a warehouse in Miami – Facebook » Shopping notifications The Washington Post

– Changing demographics • French revolution – Jobless chefs of dispossessed nobility – Open their own restaurants • Aging population – Healthcare – Retirement (pension, 401 K)

Innovation in Services • Basic Research: Pursue a planned search for new knowledge regardless of possible application. • Applied Research: Gaining new knowledge that will meet a specific need. • Development: Apply knowledge to problems to improve a current service. 3 -9

Challenges for Service Innovation • 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 3 -10

Levels of Service Innovation Radical Innovations • Major Innovation: new service that customers did not know they needed. 3 -11

• Start-up Business: new service for underserved 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 service delivery process (e. g. self -service airline boarding kiosk). • Style Changes: modest visible changes in appearances.

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 3 -15

Technology-Driven Service Innovations Source of Technology Service Example Service Industry Impact Power/energy Jet aircraft Nuclear energy International flight is feasible Less dependence on fossil fuel Facility design Hotel atrium Feeling of grandeur/spaciousness Enclosed sports stadium Year-around use Materials Photochromic glass Synthetic engine oil Energy conservation Fewer oil changes Methods Just-in-time (JIT) Six Sigma Reduce supply-chain inventories Institutionalize quality effort Information E-commerce Satellite TV Increase market to world-wide Alternative to cable TV 3 -16

Adoption of New Technology in Services • Challenges of Adopting New Technology – The Process is the Product • Customers acceptance – Loss of personal attention – Learn new skills – Forgo some benefits • Internal customers (Front office) – Retraining, (word processing vs typewriter) • Back office – Full benefits until standard accepted industry-wide » So many browsers, security settings 3 -17

• Readiness to Embrace New Technology – Technology readiness • Person’s propensity to embrace and use new technology – Evaluate customers’ level of readiness • Airport check-in Kiosk – Employee’s readiness • Implementation of ERP

Service Design Elements Topics Structural Delivery system Process structure, service blueprint, strategic positioning Facility design Servicescapes, architecture, process flows, layout Location Geographic demand, site selection, location strategy Capacity planning Strategic role, queuing models, planning criteria Managerial Information Technology, scalability, use of Internet Quality Measurement, design quality, recovery, tools, six-sigma Service encounter Encounter triad, culture, supply relationships, outsourcing Managing capacity and demand Strategies, yield management, queue management 3 -19

Customer Value Equation 3 -20

Strategic Positioning Through Process Structure • Degree of Complexity: – Measured by the number of steps in the service blueprint, – e. g. , a clinic is less complex than a general hospital • Degree of Divergence: – Amount of discretion permitted the server to customize the service, – e. g. , the activities of an attorney contrasted with those of a paralegal 3 -21

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 3 -22

Service Blueprint of Luxury Hotel F F F = Possible Fail Point 3 -23

10 minutes exercise • Service blueprint – Pick your own service process – Design the service – Use (a) new slide(s) to explain your possible service failure(s) and how to prevent them from happening (poka-yoke 防呆) • Structural Alternative – Design 2 different service products with different service levels

• Taxonomy for service process design – Degree of divergence • Low divergence: high volume with narrowly defined and focused service – Opportunity to substitute automation for labor • High divergence: more flexibility and judgment are required – Customized service (e. g. consulting) – require high level of technical and analytic skills

Taxonomy of Service Processes – Object of the service process • Goods – Provided by the customer (auto repairs) » Property must be secure from damage or loss – Provided by the service firm (facilitating goods) » Stock level and quality is concerned » E. g. Mac. Donald’s food items • Information – Back office activities – Customer service: information is communicated – Consulting: information is directly interact between client & service

• People – Physical change: haircut – Geographic change: bus ride – Interpersonal and technical skill needed

– Type of customer contact • Customer present & interact directly – Process of people » Training in interpersonal skills » Facility issues of location, layout, and design » Managing queue • Contact maybe indirect (via Internet) – Self service » ATM » Boarding pass kiosk » Customer is willing to learn how to interact with machine

• No customer contact – Manufacturing style management – Batch process, job shop

Taxonomy of Service Processes 3 -30

Generic Approaches to Service Design • Production-line • routine service • control environment to ensure consistent quality & efficiency • Customer as Coproducer • encourage customers to take an active role • Customer Contact • Separation of High and Low Contact Operations • low-contact to be designed as a technical core • Information Empowerment • IT is a fundamental part of our daily life • IT can empower customer and employee 3 -31

• Production-line approach • Manufacturing systems are designed with control of process • Output is machine paced • Jobs are designed with specific tasks to perform • Tools and machines are provided to improve efficiency – Mc. Donald’s • Hamburger patties are measured and prepackaged • French fries …

– Limited discretionary action of personnel • Employee is given well-defined task to perform with tool to accomplish them • Standardization & quality are the hallmarks – Consistency in meeting specification • Customer can expect the same level of service from all franchises – Division of labor • Job can be broken down into groups of simple tasks • Permit specialization of labor skills • Low pay & low skill employment

– Substitution of technology for people • ATM vs teller • RFID vs Highway toll system

– Service standardization • Limited menu items guarantees a fast hamburger • Routine process, well-defined tasks, easy to control

• Customers as coproducer • Customer present in the service process can support the competitive strategy of cost leadership with possible customization • Beta version of software development • Productivity gains are achieved by division of labor – Self service • Low cost airlines – Automatic check-in kiosk, sell e-ticket over the Internet • Customer controlled quality, e. g. Salad bar.

– Smoothing service demand – Service capacity is a time-perishable commodity – Whenever server is idle, service capacity is permanent loss – The nature of demand of a service is clearly RANDOM » The hour of the day » The day of the week » The season of the year

• Smoothing demand will improve service productivity – Adjust service demand to match availability of service » Appointment & reservation • Customers can avoid of waiting » Incentive to promote off-peak hours – If attempt to smooth demand fail » Initiate queue management • Great utilization of service • Customer’s frustration or • Disney’s Fast. Pass create more sale opportunity

– Customer-generated content • The Internet has opened a new opportunity for customer coproduction – Wikipedia – Social media

• Customer contact approach • Manufacturing – use inventory to decouple customer demand to achieve efficiency – use JIT to meet variation of demand lower inventory • Service delivery separate high- and low-contacts operation – Give customers a personalization feel – Reach efficiency for back office operation

– Degree of customer contact • Service quality is perceived by the customer experiences • Lower the percentage of the physical presence of the customer in the system – 網路選課 – DIY option

– Separation of high- and low-contact operations • High-contact operations require employee with excellent interpersonal skills • Low-contact operations separate from customers physically • Airlines – Reservation staff and attendants » Wear uniform and receive training – Baggage handlers and aircraft maintenance » Hardly seen by customers

– Sales opportunity and service delivery options

• Information empowerment – IT touch our life in all areas. – Service could not survive without use of IT • More than a convenient way • Empower both employees and customers

– Employee empowerment • Files age – – Customer order files Suppliers files Inventory files Interact WITHIN functional boundaries • Relational Database age – Customer service agent can check inventory – Airlines agent can rebook flights at any alliance airlines – Interact ACROSS functional boundaries

– Customer empowerment • Customers no longer confined to their local service – MIT open courses • Customer take an active part of their service – Tracking package – Supermarket check out – Get information of their travel destinations

• Intellectual property – New service design need protection from competitors copying • • Inventions (artificial heart) Trademark (Mc. Donald’s golden arches) Industrial design right (Starbucks store ambience) Trade secret (KFC recipe)

• Ten things google has found to be true (p. 82) – https: //www. google. com/about/philosophy. html – 1. 以使用者為先，一切水到渠成 • Focus on the user and all else will follow • Questions: MBA 應該取消 【必選 5 管】