PART 2 DESIGNING THE SERVICE ENTERPRISE

Chapter 3
New Service Development
Learning Objectives
• Describe sources of service sector growth.
• Describe fundamental characteristics of service innovation.
• Describe the sequence of stages and the enablers of the
new service development process.
• Prepare a service blueprint. An effective technique to
describe service delivery process in visual form.
• Compare and contrast the four approaches to service
system design:
• production-line, customer as coproducer, customer contact and
information empowerment

3-2
 Distribution of GDP in the US Economy

Product Services

A B

Physical 6% 31% 37%

Information sector
dominates the US
economy, contributing
53% of the gross
Information
10% 53% 63% domestic product.

C D

16% 84%
A = Physical Product (automotive), B= Physical Service(transportation, retailing), C= Digital Product (computer, DVD, phones),
D= Information Service(finance, telecommunication)
3-3
Sources of Services Sector Growth:
Create new demands
• Information Technology
• Higher GDP generated by information sectors
• Technological developments underlie and drive the economics of processes and value chains
creation.
• ie online shopping, banking, telemedicine

• The Internet as a Service Enabler

• An ideal vehicle for connecting with its customers in a cost-effective manner
• Wireless communication + web 2.0 social networking create new opportunity for connecting with customers
• Push information to customers service

• Innovation
• Push theory: product development driven by technology and engineering, ie new product, Netflix
(internet streaming to watch movie on computer or television)
• Pull theory: driven by customer needs: insurance business provides security evacuation from
dangerous countries or disasters

• Changing Demographics
• Aging population: health care service , pension plans for investment counseling and financial
management service, leisure activities….
Two levels of Service Innovation
• Radical Innovation
• Major innovation: new services for markets as yet
undefined. Usually are driven by information- and
computer-based technologies.
• Wells Fargo Internet banking launched in May 1995.
• Start-up business: new services in a market that already
is served by existing services.
• Mondex USA, smart cards for retail transactions.
• New services for the market presently served: new
services offerings to existing customers of an organization
• Freestanding bank branches or kiosks in supermarkets
Two levels of Service Innovation
• Incremental Innovations
• Service line extensions: augmentations of the existing
service line such as adding new menu items, new routes,
new courses
• Singapore Airlines’ first-class airport check-in an exclusive lounge.
• Service improvements: changes in features of services
that currently are offered.
• Delta Airlines use of ATM-like kiosks to issue boarding passes to
passengers.
• Style changes: modest visible changes in appearance.
• Funeral homes now arrange for celebration of life instead of mourn
death.
Ideas for new service innovations can originate from customers suggestions, frontline
employee’s observation, mining customer databases, trends in customer demographics,
and advance in technology. These ideas form the input to the “development” stage of
the new service development cycle.

Analysis stage: to
determine new
concept’s potential as
part of a profitable
business venture.

After project
authorization,
successful concepts
move to the design
phase that can be field
tested.
 
NSD process is driven by enablers:
cross-functional teams, tools, and innovative organizational culture
In the center is the service product consisting
of people, systems and technology.
The people component consists of both
employees and customers. Employees must be
recruited, trained, and empowered to deliver
services. The role of customers needs to be
defined with appropriate motivation to foster
desired behavior.

Both need systems to accomplish the required

tasks. Ex, online hotel booking is a front-office
system that interfaces directly with the
customer.

Technological advances often are the basis for

service innovation. A service firm must include
technology monitoring as an activity to protect
its competitiveness.
Service Design Elements
• Structural Elements
• Delivery system: front-back office, automation, customer participation
• Facility design: size, layout, aesthetics
• Location : customer demographics, single vs multi sites, site
characteristics, competition
• Capacity planning: managing queues, # of servers, accommodating
average or peak demands

• Managerial Elements
• Information: competitive resources, data collection
• Quality: measurement, monitoring methods, service guarantee (ch6)
• Service encounter: service culture, motivation, selection and training,
employee empowerment
• Managing capacity and demand: strategy for altering demands and
controlling supply, queuing management
SHOULDICE HOSPITAL EXPERIENCE

A Single Procedure Focused Factory

Reference:
曾哲凰 中山大學管理學院碩士論文
file:///C:/Users/user/Downloads/etd-0721104-142049.pdf
History Reference http://www.shouldice.com/our-history.html

Focus : Hernia Repairs

Process optimization :4 days 3 nights vacation package with surgery
Marketing : word-of-mouth www.shouldice.com/shouldice-experience.html
Example: Shouldice Hospital Structural Elements
Example: Shouldice Hospital Managerial Elements
Strategic Positioning through Process Structure

• Service 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.

8-16
S
c
P
eo
virceD
sag
L
iH
au
rm
xye
olrftntu
u B
eip
lr:

The top line describes the “Physical Evidence” that customers will see and experience.
The second line” Customer Actions” : customer process flow
The dashed line of interaction between the Customer Actions and Onstage Contact Person shows the
points of customer-facing activity.
The dotted line of visibility beyond which a customer cannot see.
The final dashed line of internal interaction separates the activity above from “support process”.

F F

F = Possible Fail Point

3-17
Benefits of Service Blueprinting
• Provides a platform for innovation.
• Recognizes roles and interdependencies among functions,
people, and organizations.
• Facilitates both strategic and tactical innovations.
• 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.

8-18
同樣的洗衣服務，為什麼 7-11 做了賠錢，全家卻成功經營？秘訣在「後台服務」
http://www.managertoday.com.tw/articles/view/51451
出處：經理人 作者 / 陳啟彰 2015-10-23
同樣的洗衣服務，為什麼 7-11 做了賠錢，全家卻成功經營？秘訣在「後台服務」
http://www.managertoday.com.tw/articles/view/51451
出處：經理人 作者 / 陳啟彰
Taxonomy for Service Process Design
• Service process can be classified using the concept of
• the degree of Divergence
• standardized vs customized service
• the Object of the service process
• goods, information, people
• the type of Customer Contact
• No contact, indirect, direct contact
Degree of Divergence
• A standardized service (i.e., low divergence) is designed for high
volumes with a narrowly defined and focused service.
• tasks are routine and require a workforce with relatively low levels of technical
skills.
• repetitive nature of the service, result in automation for labor substitution (e.g.,
use of vending machines, automatic car wash).
• These concepts will be referred to later as the production-line approach to
service design.

• For customized services (i.e., high divergence), more flexibility and

judgment are required to perform the service tasks.
• more information is exchanged between the customer and the service worker.
• require high levels of technical and analytic skills
• to achieve customer satisfaction, decision making is delegated to service workers who
can perform their tasks with some autonomy and discretion (i.e., the workers are
empowered).
Object of the Service Process
• Processing goods
• For services such as dry cleaning or auto repair, the service is performed on the
property of the customer, the property must be secured from damage or loss.
• Other services such as restaurants supply facilitating goods as a significant part of the
service package. Appropriate stock levels and the quality of these facilitating goods
become a concern.

• Processing information (i.e., receiving, handling, and manipulating data) occurs in all
service systems.
• back-office activity, such as check processing at a bank.
• the information is communicated indirectly by electronic means, as with telephone-
based account balance verification.
• Or services such as counseling in which information is processed through direct
interactions between the client and the project team.
•
Processing people involves physical changes (e.g., a haircut or a surgical operation) or
geographic changes (e.g., a bus ride or a car rental).
• the “high-touch” nature of these services, workers must possess interpersonal as well
as technical skills.
• Attention also must be paid to service facility design and location, because the
customer is physically  present in the system.
Type of Customer Contact
• Direct contact
• the customer can be physically present and interact directly with the
service providers in the creation of the service. The customer has full
sensory awareness of the service surroundings.
• Direct customer contact is subdivided into two categories: no interaction
with service workers (i.e., self-service) and customer interaction with
service workers.  
•
Indirect contact
• the contact may be indirect and occur via the Internet from the
customer’s home or office.

• No contact
• some service activities can be performed with no customer contact at all.
Taxonomy of Service Processes
 Generic Approaches to Service System Design
• Service package: supporting facility, facilitating goods, information,
explicit services, implicit services.
• The definition of the service package is key to designing the
service system. This design can approached in several
ways:

• Production-Line Approach
• Customer as Co-producer
• Customer Contact Approach
• Information Empowerment
All of these features are experienced by the customer
and form the basis of his or her perception of the
service.
The combinations of these approaches can be used.
Ex, banks isolate their check-processing operation, use self-serve
automated tellers, and provide personalized loan service.
Services are provided in a controlled environment to ensure
consistent quality and efficiency of operation.
 Encourage active
customer
participation in
the process.

Customer-Generated Content- ie Internet

The success of this approach
depends on the required
amount of customer contact
in the creation of the service,
and on the ability to isolate a
technical core of low-contact
operations.
IT provides customers with other ways of taking an active part in the service
process.
ie customer can go to FedEx’s home page, enter the tracking number of a package sent
through FedEx, find out exactly where the package is at that moment.