New Service Development – The Unique Challenges
Innovation policy has been traditionally focused on the manufacturing sector and that service sectors had
received less attention. Until recently the academic study of services innovation was an area of neglect.
Miles (2000)2 described services innovation as having ‘Cinderella status ... being neglected and
marginal’.
Innovation is the successful exploitation of new ideas – this definition applies
to all firms in the economy and is equally relevant to services innovation
Innovation in Services
Basic (fundamental or pure ) research is driven by a scientist's curiosity or interest in a scientific
question. The main motivation is to expand man's knowledge , not to create or invent something. There is
no obvious commercial value to the discoveries that result from basic research.
For example, basic science investigations probe for answers to questions such as:
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How did the universe begin?
What are protons, neutrons, and electrons composed of?
How do slime molds reproduce?
What is the specific genetic code of the fruit fly?
Most scientists believe that a basic, fundamental understanding of all branches of science is needed in
order for progress to take place. In other words, basic research lays down the foundation for the applied
science that follows. If basic work is done first, then applied spin-offs often eventually result from this
research
Applied research is designed to solve practical problems of the modern world, rather than to
aqcquire knowledge for knowledge's sake. One might say that the goal of the applied scientist is to
improve the human condition .
For example, applied researchers may investigate ways to:
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improve agricultural crop production
treat or cure a specific disease
improve the energy efficiency of homes, offices, or modes of transportation
Some scientists feel that the time has come for a shift in emphasis away from purely basic
research and toward applied science.It’s a research for specific common objectives.
Development is the systematic use of the knowledge directed toward the production of a product, service
or method.This includes the design a dn development of prototype or process.
While innovations in tangible products may be more easily recognised, possibly
due to their physical and ‘codifiable’ nature, there are a wealth of excellent
examples of services innovation:
Give me some examples of innovation that has occurred in the service industries?
Financial Services – many banks now offer a whole range of services online,
facilitated by ICT
Air flights – while the core offer of airlines remains transport between
destinations there has been considerable innovation in this area, for example: Low-fare carriers (e.g.
Ryanair, EasyJet) have transformed the airline
industry and the travel industry in general
Retail – there have been many innovations in retail services, but perhaps one of the most pervasive has
been through use of bar codes. The introduction of bar code scanners linked to information and
communication technology has
transformed retail.
On-line tax returns, e-commerce, helpdesk outsourcing, music download, loyalty programs, home medical test kits,
mobile phones, money market funds, ATMs and ticket kiosks, bar code, credit cards, binding arbitration, franchise
chains, instalment payment plans, leasing, patent system, public education and compound interest saving accounts
Many fundamental characteristics of the innovation process differ between product and services. The
unique challenges for service innovation include:
Ability to protect intellectual and property technology – the transparency of service system makes
imitation easier, patents difficult to obtain
Incremental nature of services – Due the jointness feature of service (jointness’ of production and
consumption – i.e. that goods can be produced meaningfully without consumers (think of a firm producing
a car), whereas services require jointness (a haircut, or repairing a car), innovation tends to be
evolutionary rather than radical to follow for acceptance.
Ability to build prototypes or conduct test in a controlled environment
Human resource development is especially important to service firms, given their high reliance on highly
skilled and highly educated workers
Levels of service innovation
Innovation is the process of making changes to something established by introducing something
new. As such, it can be radical or incremental, and it can be applied to products, processes, or services
and in any organization.
To compete in the marketplace and maintain relevancy, service companies need to innovate constantly.
But while there is a desire to innovate, actually getting new services to market is rare, and what we call
radical innovation—new services that dramatically change the marketplace—is even rarer.
Often radical service innovation will create a large population of new customers .
Incremental innovation exploits existing products, processes or technologies by improving on what
currently existed, whereas radical innovation uproots existing markets by providing something completely
new to the world.
Example adding a new menu to an existing one, new courses, changes in the features of the service
currently offered.
New Service Development
Ideas for new service innovation can originate from many sources-customer may come up with
suggestions, , trends on customer demographics can suggest new services and new advances in
technology.
Development Stage – new service, ideas are screened, winning concepts are tested for feasibility.
Concept that pass development are moved to analysis stage to determine their potential as part of a
profitable business venture.
After project authorization, successful concepts move to the design phase,time and money are expended
in design to create a new service product and a process that will be tested with appropriate training
personnel and marketing campaign will be carried out.
Finally the proven new service is given a full launch that could be available nationwide.
In the centre, is the service product consisting of people, systems and technology. This group is crucial
for the success of the new service development process.
New Service Development Cycle
• Full-scale launch
• Post-launch review
Full Launch
Development
Enablers
• Formulation
of new services
objective / strategy
• Idea generation
and screening
• Concept
development and
testing
People
• Service design
and testing
• Process and system
design and testing
• Marketing program
design and testing
• Personnel training
• Service testing and
pilot run
• Test marketing
Design
Product
Technology
Systems
Tools
Analysis
• Business analysis
• Project authorization
Service Design Elements
Consider a building, which begins in the mind’s eye of the architect and is translated onto paper in the
form of engineering drawings for all the building’s system, Foundation, structural, plumbing and electrical.
This is called a service design process.
These design elements must be engineered to create a consistent service offering that achieves the
strategic service vision.
The service design elements become a template that communicates to customers and employees alike
what services they should expect to give and receive.
A successful hospital located in Toronto, Canada, Shouldice Hospital that outperforms only inguinal
hernia operations will be used to illustrate how each element of the service concept contributes to the
strategic mission. Shouldice Hospital is privately owned and uses a special procedure to correct inguinal
hernias that has resulted in an excellent reputation. Its success is measured by the recurrence rate, which
is 12 times lower than that of its competitors.
Design Elements
Topics
Structural
Delivery system
Process structure, service blueprint, strategic
positioning
A hallmark of the Shouldice approach is patient participation in all aspects of
the process. For example, patients shave themselves before the operation,
walk from the operating table to the recovery area, and are encouraged the
evening after surgery to discuss the experience with new patients to alleviate
their preoperative fears.
Facility design
Servicescapes, architecture, process flows, layout
The facility is intentionally designed to encourage exercise and rapid
recovery within four days, providing a return-to-normal activity time
that is approximately one-half the time at traditional hospitals. Hospital
rooms are devoid of amenities, such as telephones or TVs, and
patients must walk to lounges, showers, and the interior is carpeted
and decorated to avoid any typical hospital "associations".
Location
Geographic demand, site selection, location strategy
Being located in a large metropolitan community with excellent air
service gives Shouldice access to a worldwide market. The large local
population also provides a source of patients who can be scheduled
on short notice to fill any cancelled bookings.
Capacity planning
Strategic role, queuing models, planning criteria
Because hernia operations are elective procedures, patients can be
scheduled in batches to fill the operating time available; thus, capacity
is utilized to its maximum. This ease in scheduling operations are
allows Shouldice to operate like a fully occupied hotel; thus, the
supporting activities, such as housekeeping and food service, also can
be fully employed.
Managerial
Information
Technology, scalability, use of Internet
A unique feature of the Shouldice service is the annual alumni
reunion, which represents a continuing relationship of the hospital with
its patients. Keeping information on patients allows Shouldice to build
a loyal customer base, which is an effective word-of-mouth advertising
medium. Providing free annual check-ups also allows Shouldice to
build a unique database on its procedure.
Quality
Measurement, design quality, recovery, tools, sixsigma
The most important quality feature is the adherence of all physicians
to the Shouldice method of hernia repair, which results in the low
recurrence rate of inguinal hernias among these patients. In addition,
patients with difficulties are referred back to the doctor who performed
the procedure, Perceived quality is enhanced by the Shouldice
experience, which is more like a short holiday than a typical hospital
stay.
Service encounter
Encounter triad, culture, supply relationships,
outsourcing
All employees are trained to help counsel patients and encourage
them to achieve a rapid recovery. A service culture fostering a familytype atmosphere is rein forced by communal dining for both workers
and patients.
Managing Capacity
and Demand
Strategies, yield management, queue management
Because hernia operations are elective procedures, patients can be
scheduled in batches to fill the operating time available; thus, capacity
is utilized to its maximum. This ease in scheduling operations are
allows Shouldice to operate like a fully occupied hotel; thus, the
supporting activities, such as housekeeping and food service, also can
be fully employed
Service Blueprints
What exactly are service blueprints?
The service blueprinting concept was originally conceived over twenty years ago by a bank executive,
Lynn Shostack, who published a paper on the rudiments of the approach in the Harvard Business
Review. In the intervening years the technique has evolved significantly. Service blueprints could be
described as service roadmaps -- tangible, visual documents that lay out where and how customers and
companies interact. More specifically, blueprints are information-laden documents made up of five
components that, when drawn up together, can help make customer-company relationship and the
customer experience crystal clear.
The service blueprint consists of five components, which are physical evidence, customer actions,
onstage contact, backstage contact, and support processes. The well use of service blueprint will
enhance the efficiency and productiveness of services.
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Customer actions include "all of the steps that customers take as part of the service delivery
process."
Onstage/visible contact employee actions are the actions of frontline contact employees that
occur as part of a face-to-face encounter with customers.
Backstage/visible contact employee actions are non-visible interactions with customers, such
as telephone calls, as well as other activities employees undertake in order to prepare to serve
customers or that are part of their role responsibilities.
Support processes are all activities carried out by individuals in a company who are not contact
employees, but whose functions are crucial to the carrying out of services processes.
Physical evidence represents all of the tangibles that customers are exposed or collect to during
their contact with a company.
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Just take a look at this service blueprint example, which presents the detail service
process of overnight hotel stay. Try to follow the building process of service blueprint
and explain the logic within each connection.
Example: Overnight Hotel Stay
TUTORIAL QUESTIONS
Choose a restaurant of your choice and try to blueprint the service.