SM

Chapter 8

SERVICE
INNOVATION
AND DESIGN
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Objectives for Chapter 8:Service
Innovation and Design
• Describethe challenges inherent in service innovation
and design.
• Present an array of different types of service
innovations, including service offering innovation,
innovating around customer roles, and innovation
through service solutions.
• Present the stages and unique elements of the service
innovation and development process.
• Demonstrate the value of service blueprinting and how
to develop and read service blueprints.

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 Provider GAP 2
CUSTOMER

COMPANY Customer-Driven
Service Designs and
Standards
GAP 2
Company
Perceptions of
Consumer
Expectations
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Part 3 Opener
Challenges of service innovation &
design
Oversimplification-Words are simple inadequate
describe a complex service system. Such as financial
portfolio management system.

Vacation trip = pleasing but how pleasing?

Portfolio Management = Buying and selling stocks!!
Space Shuttle Something that flies Is it a bird, a
plane or Superman?

 Incompleteness-In describing services, people

(managers, employees, customers) tend to omit details
or elements of the service with which they are not
familiar.
How the process works? How the software
works?
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Subjectivity-Any one person describing a service in words will be
biased by personal experiences and degree of exposure to the
service. Persons working in different functional areas of the same
service organization are likely to describe the service very
differently as well, biased by their own functional blinders.
•Confusion should be eliminated.
•Need to discuss different terms in details.
 Biased Interpretation-No two people will define “responsive”,
“quick”, or “flexible” in exactly the same way. Unless the term
“flexibility” is further defined, the employee is likely to interpret
the word differently.
•Responsiveness (sensitive, alert)
•Flexible ( How Much?)
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•Careful ( quick or slow) Dr. SNM IUB
 Types of Service Offering Innovation
1. Major or Radical Innovations: New services for markets as yet
undefined. Cloud, mobile apps, internet, remote repair services of machines,
remote health diagnostics foe people

2. Start-up Businesses: New services for markets already served by

existing products that meet the same generic needs. Ex: online banking for
financial transactions, Pathao, Sheba.xyz

3. New services for the currently served market: Attempts to offer

existing customers of the organization a service not previously available
from the company although it may be available from other companies.
Children Play zone in Chef’s Table, Internet in Flight.

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4. Service-line extensions : Augmentations of the existing
service line. Ex: Airline new route, restaurants add new menu.

5. Service improvements : Changes in features of services

already offered. Ex: Late Checkout facilities, extended hours of
services, faster execution of existing service process.

6. Style changes: The most modest innovations that do not

change the service fundamentally, only its appearance. Ex:
changing color scheme of restaurant, revising logo, or
redesigning website.

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Service Innovation and Development
Process
Basic principles and steps in new service development is
shown in fig 8.1.
The model assumes that new product ideas can be
dropped at any stage of the process if they do not
satisfy the criteria for success at that stage. The
checkpoints (represented by stop signs) separate the
critical stages of the development process.
The process is divided in to two sections:
1. Front-end planning and
2. Implementation

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Figure 8-1 Service
Innovation and
Development
 Business Strategy Development or Review
Process

 New Service Strategy Development

Front End
 Idea Generation
Planning
Screen ideas against new service strategy
 Concept Development and Evaluation
Test concept with customers and employees

 Business Analysis

Test for profitability and feasibility

 Service Development and Testing

Conduct service prototype test

 Market Testing
Implementation
Test service and other marketing-mix elements
 Commercialization

 Postintroduction Evaluation
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 Front-End Planning
1. Business Strategy Development or Review
• review the organization’s mission and vision.

• The new service strategy and specific new service ideas must fit within the larger
strategic mission and vision.

2. New Service Strategy Development

• The types of new services that will be appropriate depend on the organization’s
goals, vision, capabilities, and growth plans.

• By defining a new service innovation strategy (possibly in terms of markets, types

of services, time horizon for development, profit criteria, or other relevant factors),
the organization will be in a better position to begin generating specific ideas.
One way to begin formulating a new service is to use the framework shown in figure
8.2.

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 Figure 8-2
New Service Strategy Matrix for
Identifying Growth Opportunities

Markets
Offerings Current Customers New Customers

Existing
SHARE BUILDING MARKET
Services
DEVELOPMENT

New
Services SERVICE DIVERSIFICATION
DEVELOPMENT
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3. Idea Generation:
• Some approaches: Formal brainstorming, solicitation of ideas from
employees and customers, lead user research, and learning about
competitors’ offerings.
• collaborating with outsiders (e.g., competitors, vendors, alliance
partners) or developing licensing agreements and joint venture.
• Observing customers and how they use the firm's products or services.
• Contact personnel who deliver the services and interact directly with
consumers
• Internal networks of employee across functions and disciplines
• Formal service innovation or service R&D department, online
repositories where customer and/or employees can submit new service
ideas, new service development teams that meet regularly, surveys,
focus groups with customers and employees, formal competitive
analysis to identify new service idea, ,

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4. Service Concept Development and Evaluation
Once an idea surfaces that is regarded as a good fit with both
the business and the new service strategies, it is ready for
initial development. Agreement should be reached on exactly
what the concept is and what customer need it is filling.
After clear definition of the concept, it is important to produce
a description of the service representing its specific
characteristics and then determine initial customer and
employee responses to the concept.
The service concept is then evaluated by asking employees
and customers whether they understand the idea of the
proposed service, whether they favorable to the concept, and
whether they feel it satisfies an unmet need.

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 5. Business Analysis:
To estimate the economic feasibility and potential
profit implications of the service concept.
• Demand analysis, revenue projections, cost
analyses, and operational feasibility are assessed
at this stage
• The organization will pass the results of the
business analysis through its profitability and
feasibility screen to determine whether the new
service meets the minimum requirements.

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 Implementation
1. Service Prototype Development and Testing
•It involves construction of product prototypes and testing for
consumer acceptance
•The concept is refined to the point at which a detailed service
blueprint illustrating the customer experience and the
implementation plan for the service can be produced
2. Market Testing
•The new service might be offered to employees of the
organization and for their families for a time to assess their
responses to variation in the marketing mix.
•To do a Pilot run of the service to be sure that the operational
details are functioning smoothly.
•Actual market introduction may test whether the service
system functions as planned.
•“There is simply no substitute for a proper rehearsal” when
introducing a new service.
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3. Commercialization
•service goes live and is introduced to the marketplace.
•Two objectives:
•First to build and maintain acceptance of the new service
among large number of the service delivery personnel who will
be responsible for day-to-day for service quality.
•Second to monitor all aspects of the service during introduction
and through the complete service cycle. Every details of the
service should be assessed- phone calls, face-to-face
transactions, billing, complaints, and delivery problems.
Operating efficiency and costs should also be tracked.

4. Postintroduction Evaluation
At this point, the information gathered during
commercialization of the service can be reviewed and changes
made to the delivery process, staffing, or marketing mix
variables on the basis of actual market response to the offering
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Figure 8-3

Service Mapping/Blueprinting
A tool for simultaneously depicting the service
process, the points of customer contact, and the
evidence of service from the customer’s point of
view.

Process

Service
Points of Contact
blueprint
Evidence

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Service Blueprint Components
Physical evidence
• CUSTOMER ACTIONS

• ONSTAGE/visible CONTACT EMPLOYEE ACTIONS

• BACKSTAGE/ INVISIBLE CONTACT EMPLOYEE ACTIONS
• SUPPORT PROCESSES
• HYSICAL EVIDENCE

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• Customer actions:
Covers the steps, choices, activities and interactions that
the customer performs in the process of purchasing,
experiencing & evaluating the service.
Ex: phone call, face-to-face meeting, receipt of documents,
receipt of a bill.
• Onstage contact employee actions:
The activities that the contact employee performs that are
visible to the customers. Ex: The initial interview,
intermediate meetings, and final face-to-face delivery.
• Backstage/Invisible contact employee actions:
These activities occur behind the scenes to support the
onstage activities. line of internal interaction: Anything
that is prepared for the meeting behind the scene.

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•Support processes:
This section covers the internal services, steps and
interactions that take place to support the contact
employees in delivering the service.
Ex: legal research by staff, preparation of documents, and
secretarial support to set up meetings

•Physical evidence:
Usually placed above each point of contact.
Ex: office décor, written documents, lawyers' clothing.

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The four key action area are separated by Three
horizontal lines:
1. Line of interactions:
Direct interaction between the customers and the organization.
2. Line of visibility:
Separates all service activities visible to customers from those
not visible.
3. Line of internal interactions: Separates customer-contact
employees activities from those of other service support
activities and people.
• The most significant difference between service blueprint and
other process flow diagrams is the primary focus on
customers and their experience with the service process.

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 Express Mail Delivery Service
Truck Truck
Packaging
EVIDENCE
PHYSICAL

Packaging
Forms Forms
Hand-held Tech Devices Hand-held Tech Devices
Uniform Uniform
CUSTOMER

Customer Customer Receive

Calls Gives Package
Package
(Back Stage) (On Stage)
CONTACT PERSON

Driver
Picks Deliver
Up Pkg. Package

Customer
Service
Order

Airport Fly to
Dispatch Unload Load
Driver
Receives Sort Fly to
& Loads Center & On
Destination Sort Truck
SUPPORT
PROCESS

Load on
Airplane

Sort
Packages
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 Overnight Hotel Stay

Bill
EVIDENCE
CUSTOMER PHYSICAL

Desk
Hotel Cart for Desk Elevators Cart for Room Menu Delivery Food Lobby
Exterior Bags Registration Hallways Bags Amenities Tray Hotel
Parking Papers Room Bath Food Exterior
Lobby Appearance Parking
Key
Arrive Give Bags Call Check out
Go to Receive Sleep Receive
at to Check in Room Eat and
Room Bags Shower Food
Hotel Bellperson Service Leave
CONTACT PERSON
SUPPORT PROCESS (Back Stage) (On Stage)

Greet and
Process Deliver Deliver Process
Take
Registration Bags Food Check Out
Bags

Take
Take Bags Food
to Room Order

Registration Prepare Registration

System Food System

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 Benefits of Service Blueprinting
•Provides a platform for innovation.
•Recognizes roles and interdependencies among functions,
people, and organizations.
•Facilitates both strategic and tactical innovations.
•Transfers and stores innovation and service knowledge.
•Designs moments of truth from the customer’s point of view.
•Suggests critical points for measurement and feedback in
the service process.
•Clarifies competitive positioning.
•Provides understanding of the ideal customer experience.

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 Figure 8-8
Building a Service Blueprint

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6

Identify the Identify the Map the Map Link Add

process to customer or process contact customer evidence of
be blue- customer from the employee and contact service at
printed. segment. customer’s actions, person each
point of onstage activities to customer
view. and back- needed action step.
stage. support
functions.

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The End

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