1

New Service Development and Process Design

2

Origin of new services

Human needs – stimulus for new services Need for survival and growth in the private

sector Social needs not adequately covered by

private sector – stimulus for public sector

3

Life cycle of a service Infancy: many risks; high mortality rate; slow growth of demand Growth: acceptance by customer

– Pressures for additional capacity

– More efficient service

– Adjustments in managerial style Maturity: demand reaches saturation level (long duration for services

that meet genuine need) Decline: changes in economy, new improved services, changes in

technology

When to introduce new services?

4

Steps in service design

Idea generation Selection: compatibility with organization’s goals

and resources– Private sector, drop the idea if:

» Not much profit» Deteriorates company image» Incompatible with skills, facilities

– Public sector» Goals less easily definable (public welfare)» Little attention to operational issues

5

Steps in service design

Preliminary design: little product testing. Marketing present– Specify key attributes of service package

Final design: specify service level

6

New Service Development Cycle

People

Technology Systems

Product

Full Launch Development

Design Analysis

Org

aniz

atio

nal

Con

text Team

s

Tools

Enablers

• Formulation of new services objective / strategy• Idea generation and screening• Concept development and testing

• Business analysis• Project authorization

• Full-scale launch• Post-launch review

• Service design and testing• Process and system design and testing• Marketing program design and testing• Personnel training• Service testing and pilot run• Test marketing

7

Levels of Service Innovation 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 (some courses on-line) Service Line Extensions: augmentation of existing service

line (e.g. new elective courses) Service Improvements: changes in features of currently

offered service (bidding system) Style Changes: modest visible changes in appearance

8

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

9

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

10

Adoption of New Technology in Services

Challenges of Adopting New TechnologyThe Process is the ProductBack Office vs Front Office ChangesNeed for Standardization

Managing the New Technology Adoption Process

11

Service Blueprinting (Bank Lending Operation Example)

Loan application Branch Officer Pay book

30min--1hr.

Line of visibility

Deny

1 day 2 days 3 days

Fail point Customer wait Employee decision

===========

===== $ 0 $ ==== =====

Receive Payment

Final paymentDecline Notify

customerIssuecheck

Confirm

Creditcheck

AcceptPrint

paymentbook

DelinquentClose

account

Verifyincome

dataInitial

screening

Verifypayer

Employer Creditbureau Branch

recordsBank

accountsAccounting

Data baserecords

FW

Con

firm

ww

F

F

F

F

F

F

12

Service Blueprint of Luxury Hotel

13

Service design=process selectionCustomer Technology

Worker

Uncertainty and complexityService design = procedures through which workers carry out the

process– Procedures for:

» Information exchange» Material delivery/exchange» Monetary exchange» Contact

Variable sequence, occur concurrently, differ in duration

Service Design and Process Selection in HC system

14

Service Design and Process Selection in LC system

Similar to manufacturing tangible output

Worker Technology Process selection through a range of

options available with respect to equipment and procedures

15

Basic Types of Processes

Project– Long duration– Low volume– One of a kind

Well-defined activities

Duration affected by completion of critical activities

16

Basic Types of Processes

Batch (job shop)– Short duration– Low volume– Custom made

Different sequence of activities for each customer

Scheduling

17

Basic Types of Processes

Line (flow shop)– Short duration– High volume– Standard product

Standardised services

Routine sequencing

Line balancing

18

Basic Types of Processes

Continuous

Critical issue: deployment of service resources

A measure of performance: travel time to customer

19

Process Selection

Steps arranged in a logical sequence Capacity at each step must be balanced to

minimise bottlenecks Certain steps can be eliminated, or process

shortened by paralleling steps Appropriate flexibility at each step

20

Process Selection - Time

Access time: from first attempt to obtain service until the start of customer service

Queuing time: length of queue, integrity of queue

Action time: time to provide the service

21

Strategic Positioning Through Process Selection

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.

22

Structural Alternatives for a Restaurant

No Reservations

Self-seating. Menu on BlackboardEliminate

Customer Fills Out Form

Pre-prepared: No Choice

Limit to Four Choices

Sundae Bar: Self-service

Coffee, Tea, Milk onlyServe Salad & Entree Together:

Bill and Beverage Together

Cash only: Pay when Leaving

TAKE RESERVATIONSEAT GUESTS, GIVE MENUSSERVE WATER AND BREAD

TAKE ORDERSPREPARE ORDERS

Salad (4 choices)

Entree (15 choices)

Dessert (6 choices)

Beverage (6 choices)SERVE ORDERS

COLLECT PAYMENT

Specific Table SelectionRecite Menu: Describe Entrees & SpecialsAssortment of Hot Breads and Hors D’oeuvresAt table. Taken Personally by Maltre d’

Individually Prepared at table

Expand to 20 Choices: Add Flaming Dishes;Bone Fish at Table; Prepare Sauces at TableExpand to 12 Choices

Add Exotic Coffees; Sherbet betweenCourses; Hand Grind Pepper

Choice of Payment. Including House Accounts:Serve Mints

LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS HIGHER COMPLEXITY/DIVERGENCE

23

Production-line Approach to Service Design

Design the system to control the process Limit Discretion of Personnel: standardization and

consistency Division of Labor: specialisation of skills; pay only

for required skills Substitute Technology for People: soft technology

(marker card in display for replenishment) Standardize the Service: limit service array

– Opportunity for pre-planning; predictability– Uniformity in quality– Franchising possible

24

Customer Participation

Ranges from self-service to complete dependence on service provider

Substitution of consumer labor for provider labor: encourage co-production by customer (free air miles for Internet ticketing). Lower cost service

Promote Demand Smoothing: requires participation of customer. They must adjust the time of their demand to service availability– Half-price drinks before 6:00pm– Reservations & appointments: compensation for

customer is to avoid waiting time Use customer to assume a diagnostic role

25

Methodology for Process Selection

Determine service stages Determine alternative methods or

technologies to perform operations at each stage (involves distributing tasks between men and machines)

Preliminary selection of alternative methods: must meet expected level and timing of output

26

Methodology for Process Selection

Detailed alternative service production: combine alternatives at each stage– Methods must be compatible

– Each combination is analysed on the basis of» Performance criteria: capacity

» Economic criteria: purchase, installation, start-up costs, production costs)

» Qualitative criteria: operating flexibility, safety, intangibles, negatives (noise)

Evaluation and final selection

27

100 Yen Sushi House Layout

Miso and Tea Station

CONVERSATION AREA

CO

NV

ER

SA

TIO

N A

RE

A

Dishwashing Counter in Back

ENTRANCE

CONVEYOR BELT

TAKE-OUT POSITION

= CHEF

28

100 Yen Sushi House Blueprint

Customer Provider

Activities Activities

Enter Welcome Customers

Seat Themselves Serve Accessories

Make Paste

Make Selection Prepare Selections Review Demand

Make Tea Cook with Attn. to Flavor

Eat Fill Tea Remove Uneaten Sushi

Stack Plates Get from Inventory

Pay Count Plates

Leave Thank Customer Stock Inventory

Remove Accessories

Line of Visibility

Tell Friends Wash Plates, etc.

Provide High Quality Ingredients

F

FF

F

F

F

F