Service Design

New Service Development

Process
Technology in Services
 Learning Objectives

1. New service development process

2. Preparing a Service Blueprint
3. Dimensions of divergence and
complexity in a service process
4. Taxonomy of service processes to
classify a service operation
5. Generic approaches to service system
design

4-2
 Principles of Service Design
1. Know your customers
2. Determine which customer
need will be fulfilled
3. Develop service strategy,
position the service
4. Design the service, HR
requirements and tangibles
5. Design the process from
users perspective
6. Minimize hand-offs
7. Design backroom operations
8. Incorporate data collection in
process design
9. Determine extent of customer
contact and participation
10.Build flexibility and robustness in
the system
11.Design employee and customer
loyalty program in the system
12.Continuous monitoring &
improvement
4-3
 Issues in Designing a Service
System
1. Location
2. Facility design, layout for effective customer
& employee workflow
3. Processes & job definitions for the provided
services
4. Key performance indices , quality measures
5. Extent of customer involvement
6. Adequate service capacity
7. Equipment selection
8. Trade-off between cost & quality of service

4-4
 New Service Development -
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

4-5
 Technology Driven Service
Innovation
Technological advances often are the basis for radical
service innovation.

Illustrations of Technology-drive innovations are:

 Power/energy - International flights with jet aircraft

 Physical design - Enclosed sports stadiums
 Materials - Astroturf
 Methods - JIT and TQM
 Information - E-commerce using the Internet

4-6
 Service Design Elements
• Structural
- Delivery system
- Facility design
- Location
- Capacity planning
• Managerial
- Service encounter
- Quality
- Managing capacity and demand
- Information
4-7
 New Service Development
Cycle
• Full-scale launch
• Post-launch
review
Full Launch Enablers Development
• Formulation

l
nte na
• Service design Co izatio of new services
and testing xt People objective / strategy

Te
• Process and system • Idea generation

am
n
ga

s
design and testing and screening
Or

• Marketing program • Concept

design and testing Product development and
• Personnel training testing
• Service testing and Technology Systems
pilot run
• Test marketing
Tools
Design Analysis
• Business analysis
• Project
authorization
4-8
 Service Design Elements
Structural Managerial

1. Delivery System (Front 1. Service encounter

and back Office) (Culture, selection and
training, employee
2. Facility Layout (Size, empowerment, etc)
layout, etc) 2. Quality (Measurement,
3. Location (Single, Monitoring, expectations
Multiple sites, etc.) vs. perceptions, etc.)
4. Capacity Planning 3. Managing Capacity and
(Managing queues, demand (Strategies for
altering demand and
number of servers, controlling supply, etc)
average or peak 4. Information (Competitive
demand, etc.) Resource, Data Collection)

4-9
Service Blueprint of Luxury
Hotel

4-10
Service System Design
Tools
Service Blueprint for Espresso and Coffee Shop
Seen by customer

Take Drink Collect Make Drink Deliver Drink

Order Payment

Materials
Fail
Poi (Coffee, flavors,
nt milk, cups, etc.)

Line of Visibility

Prepare Order
Mixes Supplies

Not seen by customer

Chapter 5 - New Service Development 9

 Blending Blueprinting with
Lean
Womack and Jones, “Lean Consumption”, HBR March 2005.

• Principles of Lean Consumption:

1. Solve the customer’s problem completely by ensuring that all the goods and
services work, and work together
– Home: search, find, purchase, maintain, repair, upgrade
– Cell phone: calling, pda, pictures, music, hot synch., downloads, internet…
1. Don’t waste the customer’s time
– Enhanced blueprint: add value-creating, and wasted time for customer and
provider. Calculate total time and % value added.
1. Provide exactly what the customer wants
– Prevent stockouts from long supply chains
– Nike’s custom bags from NuSewCo in San Francisco
1. Provide what’s wanted exactly where it’s wanted
– Offer services through all desired channels, on-line, local, big-box, phone…
1. Provide what’s wanted where it’s wanted exactly when it’s wanted
– Sometimes this may be some time off. Could I get it customized merely by
sharing plans?
1. Continually aggregate solutions to reduce the customer’s time and hassle.
– One stop for the really big problems: mobility, communications, shelter,
health care, financial management, shopping.
 Additional concepts in
Service Design
• Service Roles – Clear, unambiguous
part to play
• Service Script - Learned sequence of
behaviors expected from service
personnel and customers
• Service Theatre – (Lovelock)
• Identification of fail points
• Setting Service Standards
4-13
 Strategic Positioning
Through Process Structure

1. Degree of Complexity: Measured by the

number of steps in the service blueprint. For
example a clinic is less complex than a
general hospital.

2. 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.

These two dimensions are used to create the

market-positioning chart. 4-14
 Complexity & Divergence based
Structural Positioning (Financial
Services)
Complexity -
High

Divergence low Divergence

- Standardized High -
Customized

Complexity -
4-15
Low
 Structural Alternatives for a
Restaurant
LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE

No Reservations TAKE RESERVATION Specific Table Selection

Self-seating. Menu on Blackboard SEAT GUESTS, GIVE MENUS Recite Menu: Describe Entrees & Specials
Eliminate SERVE WATER AND BREAD Assortment of Hot Breads and Hors D’oeuvres
Customer Fills Out Form TAKE ORDERS At table. Taken Personally by Maltre d’
PREPARE ORDERS

Pre-prepared: No Choice Salad (4 choices) Individually Prepared at table

Limit to Four Choices Entree (15 choices) Expand to 20 Choices: Add Flaming Dishes;
Bone Fish at Table; Prepare Sauces at Table
Sundae Bar: Self-service Dessert (6 choices) Expand to 12 Choices

Coffee, Tea, Milk only Beverage (6 choices) Add Exotic Coffees; Sherbet between
Serve Salad & Entree Together: SERVE ORDERS Courses; Hand Grind Pepper
Bill and Beverage Together

Cash only: Pay when Leaving COLLECT PAYMENT Choice of Payment. Including House Accounts:
Serve Mints

4-16
 Taxonomy of Service
Processes

No
 Generic Approaches to Service
Design
• Production-line
• Limit Discretion of Personnel
• Division of Labor
• Substitute Technology for People
• Standardize the Service
• Customer as Coproducer
• Self Service
• Smoothing Service Demand
• Customer Contact
• Degree of Customer Contact
• Separation of High and Low Contact Operations
• Information Empowerment
• Employee
• Customer

4-18
 Customer Value Equation

Value =
( Re sults Pr oduced ) + ( Pr ocessQuality )
( Pr ice ) + ( CostsofAcquiringtheService)

4-19
 Questions?

What did we learn?

 100 Yen Sushi House
1. Prepare a service blueprint for the 100 Yen
Sushi House.
2. What features differentiate 100 Yen Sushi
House and how do they create a competitive
advantage?
3. How has the 100 Yen Sushi House
incorporated the just-in-time system into its
operations?
4. Suggest other services that could adopt the
100 Yen Sushi House service delivery
concept. 4-21
100 Yen Sushi House Layout

Dishwashing Counter in Back

CONVERSATION AREA
Miso and Tea Station

CONVEYOR
BELT

CONVERSATION AREA
TAKE-OUT
POSITION

ENTRANCE = CHEF

4-22
 Commuter Cleaning - New Venture
Proposal
1. Prepare a service blueprint for Commuter
Cleaning.
2. What generic approach to service design is
illustrated by Commuter Cleaning, and what
competitive advantage does this offer?
3. Using the data in Table 4.6 calculate a break-even
price per shirt if monthly demand is expected to
be 20,000 shirts and the contract with a cleaning
plant stipulates a charge of $0.50 per shirt.
4. Critique the business concept, and make
recommendations for improvement.

4-23
 Golfsmith
1. Prepare a service blueprint for
Golfsmith.
2. What generic approach to service
design does Golfsmith illustrate and
what competitive advantages does
this design offer?
3. Why is Golfsmith a good candidate for
Internet sales?
4-24
INTERACTIVE CLASS EXERCISE
The class breaks into small groups and
prepares a service blueprint for Village Volvo.

4-25