Post on 28-Mar-2015
Chapter 04New Service Development
McGraw-Hill/IrwinService Management: Operations, Strategy, and Information Technology, 6e
Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Learning Objectives Describe the fundamental characteristics of service
innovation. Describe the four structural and four managerial elements of
service design. Describe the components of the customer value equation. Explain and differentiate what is meant by the divergence and
the complexity of a service process. Describe the sequence of states and the enablers of the new
service development process. Prepare a blueprint for a service operation. Explain the difference between direct and indirect customer
contact. Compare and contrast the four approaches to service system
design: production-line, customer as coproducer, and information empowerment.
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Innovation in Services Basic Research: Pursue a planned
search for new knowledge regardless of possible application.
Applied Research: Apply existing knowledge to problems in creation of new service.
Development: Apply knowledge to problems to improve a current service.
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Innovation
CREATINGSOMETHING
NEW
혁신創新创新革新
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.
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Levels of Service Innovation
Radical Innovations Major Innovation: new service that customers did
not know they needed. 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 boarding kiosk).
Style Changes: modest visible changes in appearances. 4-6
Technology-Driven Service Innovations
Source of Technology
Service Example Service Industry Impact
Power/energy Jet aircraft Nuclear energy
International flight is feasibleLess dependence on fossil fuel
Facility design Hotel atriumEnclosed sports stadium
Feeling of grandeur/spaciousnessYear-around use
Materials Photochromic glassSynthetic engine oil
Energy conservationFewer oil changes
Methods Just-in-time (JIT)Six Sigma
Reduce supply-chain inventoriesInstitutionalize quality effort
Information E-commerceSatellite TV
Increase market to world-wideAlternative to cable TV
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Service Design Elements
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
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New Service Development Cycle
People
Technology Systems
Product
Full Launch Development
Design Analysis
Org
aniz
atio
nal
Con
text Team
s
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
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Service Blueprint of Luxury Hotel
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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.
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Structural Alternatives for a Restaurant
No ReservationsSelf-seating. Menu on Blackboard
EliminateCustomer Fills Out Form
Pre-prepared: No Choice
Limit to Four Choices
Sundae Bar: Self-service
Coffee, Tea, Milk onlyServe Salad & Entree Together:
Bill and Beverage Together
Cash only: Pay when Leaving
TAKE RESERVATIONSEAT GUESTS, GIVE MENUSSERVE WATER AND BREAD
TAKE ORDERS
Salad Bar
Entree (6 choices)
Dessert (6 choices)
Beverage (6 choices)SERVE ORDERS
CASH OR CREDIT CARD
Specific Table SelectionRecite Menu: Describe Entrees & SpecialsAssortment of Hot Breads and Hors D’oeuvresAt table. Taken Personally by Maltre d’
Salad (4 choices)
Expand to 10 Choices: Add Flaming Dishes;Bone Fish at TableExpand to 12 Choices
Add Exotic Coffees; Wine list, LiqueursSeparate-courses; Hand Grind Pepper
Choice of Payment. Including House Accounts:Serve Mints
LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE
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Taxonomy of Service Processes
Low divergence High divergence (standardized service) (customized service) Processing Processing Processing Processing Processing Processing of goods Information of people of goods Information of people Dry Check Auto repair Computer No Cleaning processing Tailoring a programming Customer Restocking Billing for a suit Designing a Contact a vending credit card building machine Ordering Supervision Indirect groceries of a landing customer from a home by an air contact computer controller No Operating Withdrawing Operating Sampling Documenting Driving a customer- a vending cash from an elevator food at a medical rental car service machine an ATM Riding an buffet dinner history Using a worker Assembling escalator Bagging of health club interaction premade groceries Searching for facility (self- furniture informationDirect service) in a libraryCustomer Customer Food Giving a Providing Home Portrait HaircuttingContact service service in a lecture public carpet painting Performing worker restaurant Handling transit cleaning Counseling a surgical interaction Hand car routine bank Mass Landscaping operation
washing transactions vaccination service
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Generic Approaches to Service Design
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
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Customer Value Equation
erviceuiringtheSCostsofAcqice
tyocessQualioducedsultsValue
Pr
PrPrRe
4-15
Discussion Questions
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?
4-16
100 Yen Sushi House
1. Prepare a service blueprint for the 100 Yen Sushi House.
2. What features differentiate 100 Yen Sushi House and how do they create a competitive advantage?
3. How has the 100 Yen Sushi House incorporated the just-in-time system into its operations?
4. Suggest other services that could adopt the 100 Yen Sushi House service delivery concept.
4-17
100 Yen Sushi House Layout
Miso and Tea Station
CONVERSATION AREA
CO
NV
ER
SA
TIO
N A
RE
A
Dishwashing Counter in Back
ENTRANCE
CONVEYOR BELT
TAKE-OUT POSITION
= CHEF
4-18
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 4.7 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.
4-19
Golfsmith
1. Prepare a service blueprint for Golfsmith.
2. What generic approach to service design does Golfsmith illustrate and what competitive advantages does this design offer?
3. Why is Golfsmith a good candidate for Internet sales?
4-20
INTERACTIVE CLASS EXERCISE
The class breaks into small groups and prepares a service blueprint for Village Volvo.
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