New Service Development
and Process Design
Customer Benefit Package
Hierarchy
Level
Element
Core Good
Example
Core Service
Example
Category
Business
Custom
clothier
Business
hotel
First
Core
Business
suits
Room for
the night
Second
Peripheral
Good
Garment
bag
Bath robe
Peripheral
Service
Deferred
payment
plans
In house
restaurant
Variant
Coffee
lounge
Airport
shuttle
Third
Learning Objectives







Discuss the new service development process.
Prepare a blueprint for a service operation.
Describe a service process using the dimensions of
divergence and complexity.
Use the taxonomy of service processes to classify a service
operation.
Compare and contrast the generic approaches to service
system design.
Place an example of service automation in it proper
category.
Discuss the managerial issues associated with the adoption
of new technology.
Levels of Service Innovation
Radical Innovations



Major Innovation: new service driven by information and
computer based technology
Start-up Business: new service for existing 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 features of currently
offered service
Style Changes: modest visible changes in appearances
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
Technology Driven Service Innovation
 Power/energy
- International flights with jet
aircraft
 Physical design - Enclosed sports stadiums
 Materials - Astroturf
 Methods - JIT and TQM
 Information - E-commerce using the Internet
Classification of Service Automation
 Fixed-sequence
(F) - parking lot gate
 Variable-sequence (V) - ATM
 Playback (P) - answering machine
 Numerical controlled (N) - animation
 Intelligent (I) - autopilot
 Expert system (E) - medical diagnosis
 Totally automated system (T) - EFT
Adoption of New Technology in
Services
 Challenges
of Adopting New Technology
The Process is the Product
Back Office vs Front Office Changes
Need for Standardization
 Managing the New Technology Adoption
Process
Ten step process with concern for
employees and customers
Example of Service Blueprinting
Standard
execution time
2 minutes
Brush
shoes
30
secs
Total acceptable
execution time
5 minutes
Seen by
customer
Line of
visibility
Not seen by
customer but
necessary to
performance
Clean
shoes
45
secs
Apply
polish
30
secs
Fail
point
Buff
Collect
payment
45
secs
15
secs
Wrong
color wax
Materials
(e.g., polish, cloth)
Select and
purchase
supplies
Service Blueprinting
(Bank Lending Operation Example)
Loan application Branch
30min--1hr.
Officer
Pay book
===
====
====
=====
$ 0 $
====
=====
w
w
Line of visibility
Decline
F
Deny
Verify
income
data
Initial
screening
F
Receive
Payment
Notify
customer
Credit
check
1 day
Accept
2 days
Confirm
Print
payment
book
Delinquent
F
Verify
payer
F
Bank
accounts
Issue
check
3 days
Credit
bureau
Employer
Final
payment
Branch
records
Accounting
F
Data base
records
F
Fail point
W
Customer wait
Employee decision
F
Close
account
Service Blueprint of Luxury Hotel
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.
Structural Alternatives for a Restaurant
LOWER COMPLEXITY/DIVERGENCE
CURRENT PROCESS
No Reservations
Self-seating. Menu on Blackboard
Eliminate
Customer Fills Out Form
TAKE RESERVATION
SEAT GUESTS, GIVE MENUS
SERVE WATER AND BREAD
TAKE ORDERS
PREPARE ORDERS
Pre-prepared: No Choice
Salad (4 choices)
Limit to Four Choices
Entree (15 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
COLLECT PAYMENT
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’
Individually Prepared at table
Expand to 20 Choices: Add Flaming Dishes;
Bone Fish at Table; Prepare Sauces at Table
Expand to 12 Choices
Add Exotic Coffees; Sherbet between
Courses; Hand Grind Pepper
Choice of Payment. Including House Accounts:
Serve Mints
Structural Positioning of
Healthcare Services
HIGH COMPLEXITY
* Forensic-Testing Lab
* Hospitals Services
* General Practitioner:
Diagnosis & Treatment
* Diagnostic services only
Specialist:
* Treatment only
HIGH DIVERGENCE
LOW DIVERGENCE
Outpatient Clinic: Limited
* Treatment: e.g. Broken
Bones/Minor Burns only
* Retailer of
Orthopedic Supplies
* X-Ray Lab
* Medical
Counseling
LOW COMPLEXITY
Taxonomy of Service Processes
Low divergence
(standardized service)
Processing
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
Processing
of goods
Information
Auto repair
Computer
Tailoring a
programming
suit
Designing a
b uilding
Processing
of people
Supervision
of a landing
by an air
controller
Operating
Sampling
Documenting
an elevator food at a
medical
Riding an
buffet dinner history
escalator
Bagging of
groceries
Searching for
information
in a library
Providing
Home
Portrait
public
carpet
painting
transportcleaning
Counseling
a tion
Landscaping
Providing
service
mass
vaccination
Driving a
rental car
Using a
health club
facility
Haircutting
Performing
a surgical
operation
Generic Approaches to Service Design




Production-line
• Limit Discretion of Personnel
• Division of Labor
• Substitute Technology for People
• Standardize the Service
Customer as Coproducer
• Substitution of Customer Labor for Provider
• Smoothing Service Demand
Customer Contact
• Degree of Customer Contact
• Separation of High and Low Contact Operations
Information Empowerment
• Employee and Customer
Production-line Approach to
Service Design
 Limit
Discretion of Personnel
 Division
of Labor
 Substitute
Technology for People
 Standardize
the Service
Customer Participation
 Encourage
Co-production by Customer
Free air miles for Internet ticketing

Promote Demand Smoothing
Half-price drinks before 6:00pm
Customer Contact View of Services
 Degree
of Customer Contact Influences
Potential Efficiency of Service
 Separate
High- and Low-Contact
Operations
 Consider
Sales Opportunity and Production
Efficiency Tradeoff
Service-System Design Matrix
Degree of customer/server contact
High
Buffered
core (none)
Permeable
system (some)
Reactive
system (much)
Low
Face-to-face
total
customization
Face-to-face
loose specs
Sales
Opportunity
Face-to-face
tight specs
Internet &
on-site
Mail contact technology
Low
Production
Efficiency
Phone
Contact
High
Information Empowerment
 Employees
Relational Databases
 Customers
Internet Web Site
Discussion Questions
What ethical issues are raised in the promotion of
sales during a service transaction?
 What are some drawbacks of customer
participation in the service delivery process?
 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.

INTERACTIVE CLASS EXERCISE
The class breaks into small groups and
prepares a service blueprint for Village
Volvo.