Service Management –
New Service Development
Univ.-Prof. Dr.-Ing. Wolfgang Maass
Chair in Economics – Information and Service Systems (ISS)
Saarland University, Saarbrücken, Germany
WS 2011/2012
Thursdays, 8 –10 a.m.
Room HS 024, B4 1
New Service Development
•  Starting with service concept and strategy to provide
service with features that differentiate it from
competition (cf. lecture #2 “Service Strategy”)
•  Design process is never finished
•  2 basic types of service innovation (Chew, 2010)
–  Service enhancement for incremental growth
–  New growth idea (Anthony et al., 2008), or new
service idea that could become a new growth
platform (Laurie et al., 2006)
•  How to develop new services? -- e.g.,
a)  NSD Process Cycle (Johnson et al., 2000)
b)  Service Innovation Process (Thomke, 2003)
(Fitzsimmons & Fitzsimmons, 2011)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 2
A) NSD Process Cycle
o
o
(Johnson et al., 2000; Fitzsimmons & Fitzsimmons, 2011)
Full-scale launch
Post-launch review
Full Launch
Enablers
Development
o
o
o
o
o
o
o
Service design
and testing
Process and
system design
and testing
Marketing
program design
and testing
Personnel training
Service testing
and pilot run
Test marketing
People
o
Product
Technology
o
Formulation of new
services objective/
strategy
Idea generation and
screening
Concept development
and testing
Systems
Tools
Design
Analysis
o
o
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Business analysis
Project authorization
Slide 3
Technology as Innovation Driver
•  Technological advances are often basis for service
innovation
•  e.g., Amazon: built up a loyalty customer base and gain
competitive advantage as a technology first-mover (1995)
•  e.g., mobiles by Apple combined with app store represent
platform for dozens of new services
Source of technology Service example Service industry impact Power/energy Nuclear energy Less dependence on fossil fuel Materials Synthe:c engine oil Fewer oil changes Informa:on eCommerce Increase (local) market to worldwide market Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 4
B) Service Innovation Process
•  Service innovation process consists of five phases (designed for new
innovations where success is less certain)
(1)  Evaluate ideas – Conceive, assess, prioritize ideas from internal and
external sources
(2)  Plan and design – Assign design needs, complete design, build rollout
plan
(3)  Implement – Develop test plan, implement idea
(4)  Test – Monitor performance of idea, report results of fast feedback by
market, improve process in a stable operating environment
(5)  Recommend – Complete, review and approve, communicate
recommendation
(Thomke, 2003)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 5
Service Design Elements
•  Service design elements -- creating a consistent
service offering
•  Structural design elements:
a.
Delivery system – process structure, service
blueprint, strategic positioning
b.  Facility Design – servicescape, layout
c.
Location – geographic demand, site selection,
location strategy
d.  Capacity planning – strategic role, queuing
models
(Fitzsimmons & Fitzsimmons, 2011)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 6
Service Design Elements
•  Service design elements -- creating a consistent
service offering
Example:
Hairdresser
•  Structural design elements:
a.
Delivery system – process structure, service
blueprint, strategic positioning
b.  Facility Design – servicescape, layout
c.
Location – geographic demand, site selection,
location strategy
d.  Capacity planning – strategic role, queuing
models
Co-production of
customers; drying hair
themselves
Modern style; lounge style
with coffee in waiting area
Located in large malls
Web-based booking
system to choose date,
service and employee
(Fitzsimmons & Fitzsimmons, 2011)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 7
Service Design Elements
•  Managerial design elements:
a.
Information – technology, scalability, use of
Internet
b.  Quality – measurement, design quality, recovery,
tools
c.
Service encounter – encounter triad, culture,
supply relationships, outsourcing
d.  Managing capacity and demand – strategies,
yield management, queue management
(Fitzsimmons & Fitzsimmons, 2011)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 8
Service Design Elements
Example:
Hairdresser
•  Managerial design elements:
a.
Information – technology, scalability, use of
Internet
b.  Quality – measurement, design quality, recovery,
tools
c.
Service encounter – encounter triad, culture,
supply relationships, outsourcing
d.  Managing capacity and demand – strategies,
yield management, queue management
Looking up current
number of customers in
store on web page
Free cutting of fringe and
repairing of cuts
Family-type atmosphere
Walk-in customers –
“Take a number”
(Fitzsimmons & Fitzsimmons, 2011)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 9
Service Blue Printing
•
“The development of a new service is usually characterized by trial and error.
Developers translate a subjective description of a need into an operational
concept that may bear only a remote resemblance to the original idea. No one
systematically quantifies the process or devises tests to ensure that the service is
complete, rational, and fulfills the original need objectively.” (Shostack, 1984, p.
133)
•
“A service blueprint allows a company to explore all the issues inherent in
creating or managing a service.” (Shostack, 1984, p. 135)
•
Service blueprint - capturing service design in a visual diagram (like building)
•
“Service blueprinting, which started as an entirely manual process, has been
automated by companies to provide “living blueprints” accessible to key parties
online […].” (Bitner et al., 2010, p. 210).
(Fitzsimmons & Fitzsimmons, 2011)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 10
Service Blue Printing
How to design a service blueprint?
(1)  Identifying processes - breakdown of complex processes into steps; identification
of parts of service not seen by customer, e.g. purchasing of supplies
(2)  Isolating fail points – build (fail-safe) sub processes to correct possible errors
(3)  Establishing time frame – consideration of
execution time of service as major cost
determinant; calculating maximum of deviation
(4)  Analyzing profitability – quantifying costs of
delay; establishment of time-of-serviceexecution standard to measure
performance / control uniformity and quality;
serves as model for distribution of service
(Shostack, 1984, p. 135)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 11
Characteristics of Service Processes
•
Complexity – number of steps and
sequences in process
•
Divergence – amount of discretion or
freedom that server has to customize the
service
•
Object of service process – goods,
information, people
•
Type of customer contact – no contact,
indirect, direct
(Fitzsimmons & Fitzsimmons, 2011)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 12
Brainteaser
•  The taxonomy of services processes
(Wemmerlöv, 1990) categorizes services
according to the level of divergence, the
degree of customer contact as well as the
type of object of the service process.
10
Minutes
•  Fill out the table with exemplary service
processes.
•  Discuss it with your neighbor!
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 13
At Your Own Risk…
Divergence
Complexity
•
•
•
Steps of functions are dropped
Specialization strategy
•
+ resources focused on narrower service
Leads to uniformity that tends to reduce
costs, improve productivity
Indicates shift to “economy of
scale” (volume-oriented)
+ increases in reliability; more quality and
service availability
•
•
offering; easier distribution and control;
expert position
•
•  - Conformity and inflexibility, limiting
- perceived as “stripped down”; danger
of full-service alternatives
customization options
Complexity
Divergence
•
•
•
•
•
Expanding service line
Greater penetration in market
+ increased efficiency by maximizing
revenue generated from each
customer
- confusing customers; reduction of
overall service quality; danger of
specialized competitors
•
•
•
Greater customization and flexibility tend
to higher prices
Indicates niche positioning strategy
+ prestige, customization, personalization
- service difficult to manage, control and
distribute; customers may not be willing to
pay higher prices
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
(Shostack, 1987)
Slide 14
How to Design a Service System?
•  Service experience = theater; service design similar to staging a
production (Grove & Fisk, 1992)
•  Experience economy in which service providers compete on the design of
customer experiences (Pine & Gilmore, 1999)
•  Diverse approaches to design the service system
a)  Production-line approach
b)  Customer as co-producer
c)
Customer contact approach – Isolating technical core of low-contact
operations from high-contact operations and design both separately (Chase,
2010); line of visibility; appropriate for processing-of-goods category
d)  Information empowerment – empowerment of employees and customers
through IT
(Spohrer & Maglio, 2010; Fitzsimmons & Fitzsimmons, 2011)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 15
A) Production-Line Approach
•  Delivery of routine services provided in controlled
environments to ensure consistent quality and
efficiency
•  Competitive advantage with cost-leadership strategy
•  Limited discretionary action of personnel – identical
service at any location
•  Division of labor – total job is broken into simple tasks
•  Substitution of technology for people – e.g., ATM
•  Service standardization – limited service options
guarantee predictability and preplanning; routine
processes; helps to ensure service quality
(Fitzsimmons & Fitzsimmons, 2011)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 16
B) Customer as Co-Producer
•  Customer represents productive labor at the moment
it is needed – opportunity to increase productivity by
shifting some activities to customer (Edvardsson et al.,
2010)
•  Increasing degree of customization through co-creation
– open innovation (van Hippel, 1986)
•  Cost leadership strategy with some customization
•  Self-Service – customer receives benefits for her labor
in form of convenience
•  Smoothing service demand – smoothing variations in
service demand; allows uniform utilization of capacity
(e.g., midweek discounts)
•  Customer-generated content
(Fitzsimmons & Fitzsimmons, 2011)
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 17
Literature
Books:
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Fitzsimmons, J. A. & Fitzsimmons, M. J. (2011), Service Management - Operations, Strategy, Information
Technology, McGraw - Hill.
Pine, B. J.and Gilmore, J. H. (1999), The Experience Economy: Work is Theatre and Every Business a
Stage, Harvard Business School Press, Boston, MA.
Papers:
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Anthony, S. D.; Johnson, M. W. & Sinfield, J. V. (2008), 'Institutionalizing Innovation', MIT Sloan
Management Review 49(2), 45-53.
Bitner, M. J.; Ostrom, A. L. & Morgan, F. N. (2008), 'Service Blueprinting: A Practical Technique for Service
Innovation', California Management Review, 66-94.
Bitner, M. J.; Zeithaml, V. A. & Gremler, D. D. (2010), Technology’s Impact on the Gaps Model of Service
Quality'Handbook of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C.
Chase, R. B. (2010), Revisiting “Where Does the Customer Fit in a Service Operation?” - Background and
Future Development of Contact Theory'Handbook of Service Science', Maglio, Paul P. and Kieliszewski,
Cheryl A. and Spohrer, James C.
Chew, E. K. (2010), A Reflection From Telecommunications Service Perspective'Handbook of Service
Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C.
Edvardsson, B.; Enquist, B. & Johnston, R. (2005), 'Cocreating customer value through hyperreality in the
prepurchase service experience', Journal of Service Research 8(2), 149-161.
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 18
Literature
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Edvardsson, B.; Gustafsson, A.; Kristensson, P. & Witell, L. (2010), Service Innovation and Customer CoDevelopment'Handbook of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James
C.
Grove, S. J. & Fisk, R. P. (1992), 'The service experience as theater', Advances in Consumer Research 19,
455-461.
Hippel, E. v. (1986), 'Lead Users. A Source of novel product concepts.', Management Science 32, 791-805.
Johnson, S.; Menor, L.; Roth, A. & Chase, R. (2000), A critical evaluation of the new services development
process: integrating service innovation and service design, in J.A. Fitzsimmons & M.J. Fitzsimmons,
ed.,'New Service Development', Sage Publications.
Laurie, D. L.; Doz, Y. L. & Sheer, C. P. (2006), 'Creating new Growth Platforms', Harvard Business Review,
80 – 90.
Shostack, G. L. (1987), 'Service positioning through structural change', Journal of Marketing 51(1), 34—43.
Shostack, G. L. (1984), 'Designing services that deliver', Harvard Business Review 62(1), 133—139.
Spohrer, J. C. & Maglio, P. P. (2010), Toward a Science of Service Systems - Value and Symbols'Handbook
of Service Science', Maglio, Paul P. and Kieliszewski, Cheryl A. and Spohrer, James C.
Thomke, S. (2003), 'R&D Comes to Services – Bank of America’s Pathbreaking Experiments', Harvard
Business Review, 71 – 79.
Wemmerlöv, U. (1990), 'A Taxonomy for Service Processes and its Implications for System Design',
International Journal of Service Industry Management 1(3), 20--40.
Univ.-Prof. Dr.-Ing. Wolfgang Maass
09.11.11
Slide 19
Univ.-Prof. Dr.-Ing. Wolfgang Maass
Chair in Information and Service Systems
Saarland University, Germany
Univ.-Prof. Dr.-Ing. Wolfgang Maass