managing the new service development process: multi...

A chapter in New Directions in Supply-Chain Management :Technology, Strategy and Implementation, Boone and Ganeshan [eds .],American Management Association, New York, 2002 .

Table of contents attached on back of this chapter .

Chapter 10

Managing the New Service

Development Process : Multi-Disciplinary Literature Synthesisand Directions for Future Research

Mohan V Tatikonda and Valarie A . ZeithamlUniversity of North Carolina at Chapel Hill

INTRODUCTION

THE DEVELOPMENT OF NEW SERVICES is an increasingly importantsubject, particularly given today's rapidly growing service economy (Schmenner 1995 ;Fitzsimmons and Fitzsimmons 1998 ; Zeithaml and Bitner 2000) . Although the develop-ment of physical goods has received substantial attention in the past decade, relativelylittle literature addresses detailed steps in the development process for new services(Edvardsson, Haglund, and Mattsson 1995 ; Martin and Horne 1993) . To date, few sys-tematic empirical studies of new service development have been conducted (Tax andStuart 1997 ; Fitzsimmons and Fitzsimmons 2000) . For these and other reasons, there isa pressing need to identify potentially fruitful areas for future empirical research on newservice development .

Managing the New Service Development Process 201

We view new service development as the organizational process that links market-ing and operational capabilities to conceive, design and implement a service valued by acustomer. We believe a multi-disciplinary and integrated perspective is necessary toaddress this fundamentally cross-functional activity . The relative lack of research on newservice development may stem from the fact that no functional discipline has claimed thetopic to be completely in its domain . This chapter reviews extant literature from severaldisciplines-service operations, services marketing, and product innovation-to identifyfuture research areas. We hope that the summarization and integration of these litera-tures helps inform readers from disparate disciplines about the broad literature andpotential extensions to it . Further, we introduce some concepts (such as "service archi-tecture" and "design for implementation principles") which we believe merit furtherstudy.

The first section distinguishes the development of services from that of physicalgoods . It reviews the archetypal differences between services and physical goods with anemphasis on the implications of these differences for the service development processversus the physical goods development process . The next section provides an overviewof the service development process at the level of the individual new service develop-ment project, and notes that the service development process has a "front end" and a"back end," where the front end selects a service concept to develop more fully, while theback end implements this chosen service concept .

The section that follows summarizes literature and presents research issuesregarding the front end. It addresses service positioning, idea generation and evalua-tion, and the use of formal marketing research . The next section summarizes litera-ture and presents research issues regarding linking the front and back ends so that aneffective service-delivery process can be developed . This section introduces a numberof important concepts . First it identifies the four major categories of elements thatmust be developed and implemented in the back end : the overall service-deliveryprocess sequence, personnel, facilitating goods, and supporting facilities . The notionof "internal newness" that captures the required degree of change from extant oper-ational capabilities for each category is discussed . This section introduces the conceptof the "service architecture" which assists in integrating the traditionally marketing-oriented front end and traditionally operational-oriented back end activities, and dis-cusses tools to specify a service architecture . The final sections summarize literatureand pose research issues regarding the back end of service development-the devel-opment and implementation of the overall service-delivery process sequence, per-sonnel, facilitating goods, and supporting facilities . This is followed by the conclusionof the chapter .

202 Technology-Based Product and Service Development

DIFFERENCES BETWEEN SERVICES AND GOODS :IMPLICATIONS FOR THE DEVELOPMENT PROCESS

We distinguish services new product development ( SNPD) from physical goods new prod-

uct development (PNPD) to clearly address commonalities and differences between the

two. There has long been a sense that "goods" and "services" are different. One key dif-

ference is the intended output of the product development process . The output of the

PNPD process is a fully developed physical entity. That is, a physical product, manufac-

tured product, or good such as a television set, table, or automobile . In contrast, the out-

put of the SNPD is a fully developed service-delivery process . This is a system, sequence,

flowchart, or script of: (1) service tasks, sub-tasks, and interactions between the service

provider and the customer; (2) who does what and when ; and (3) the necessary support-

ing materials, equipment, facilities, and services . The output of the SNPD is, at its core,

a series of steps and a statement of all the elements that go into supporting the accom-

plishment of that series of steps . Further, because the word "process" takes on a variety

of meanings, it is necessary to differentiate two processes in the service context: the ser-

vice new product development process and the service-delivery process . The SNPD

process develops the service-delivery process . It is often said (see Chase, Aquilano, and

Jacobs 1998, p . 147) in services that the product is the (service-delivery) process .

Although the outputs of the SNPD and PNPD are different, should the develop-ment process for a service differ from that for a physical good? Services have been

described as having four characteristics which, although not orthogonal, do collectively

explain essential differences between services and physical products . The differences are :

(1) intangibility ; (2) simultaneity (or simultaneous production and consumption, also

called "co-production" or "inseparability") ; (3) heterogeneity (variability in service pro-

vision) ; and (4) perishability (Palmer and Cole 1995 ; Edgett and Parkinson 1993 ; Zei-

thaml, Parasuraman, and Berry 1985) . Intangibility means that services, which are per-

formances or actions rather than objects, cannot be seen, felt, tasted, or touched in the

same manner as goods . Simultaneity refers to the fact that most services are produced

and consumed at the same time . Whereas physical products are produced first, then

consumed, many services are produced and consumed at the same time in the presence

of both the customer and the service provider. Heterogeneity means that service per-

formances are rarely uniform across customers and providers-there is non-trivial vari-

ety in the process of providing the service and in the perception of quality of the ser-

vice. Finally, perishability refers to the fact that services cannot be saved, inventoried,

resold, or returned. If service capacity is unused, it is lost . And if demand is in excess of

capacity, the potential to serve that demand is often lost. Table 10 .1 explores how these

four characteristics influence the need for a different development process for services

or emphasis on certain aspects of the process .


TABLE 10.1 The Four Unique Service Characteristicsand Their Implications for the Development Process .

1 . Intangibility .

•

First, services cannot be readily displayed or communicated (Zeithaml,Parasuramanan, and Berry 1985) . During development of new services, those whomust communicate with each other-marketing and operations, service franchisors

and franchisees, management and employees, and perhaps most importantly

employees and customers-may not envision the same new service characteristics .It is more difficult to gain a "shared understanding" of the service concept, and it ismore difficult to conduct market research for early marketing evaluation purposes .

•

Second, firms may partially resolve this problem by "tangibilizing" the serviceconcept. This involves making the concept "hard" through prototypes, flowcharts,drawings or pictures which may more easily communicate the intended service .Third, because new services are often intangible and abstract, and may have unclear

potential benefits (in the customers' eyes), the service firm's image and reputation

can help overcome the customer's initial adoption uncet'tainry.

2. Simultaneity .

Both customers and providers are involved in the service activity. The customer oftenexperiences the service in the presence of employees of the firm . Accordingly, the

process by which the service is produced, consumed, and delivered is critical .

•

First, operations personnel (particularly customer contact personnel) are intimately

involved in the service-delivery process, and so should be active in the SNPD process.

Developing new services can mean more work and complexity for operations

employees (who are often already busy with continuing operations), and so suchpersonnel may limit the number of ideas for new services (Easingwood 1986) . Thisbehavior may provide a needed "reality check" regarding extant operational

capabilities and the feasibility of a proposed new service . Appropriate performance

measurement and reward systems may encourage operational involvement and ideas .

•

Second, customers may have insight regarding perceived service effectiveness and

quality not only because they are recipients of the service, but also because they are

involved in the production and delivery of the service . They too should beparticipants in the new service development process.

•

Third, it is often not possible to gain significant economies of scale through

centralization or mass production of the customer contact portion of the service(the "front room") . Accordingly, the SNPD process should consider relative front

(continues)

204 Technology-Based Product and Service Developme nt

(Table 10 .1 continued)

room versus back room work content, design, and implications for volume and

product variety.

•

Fourth, because the customer is involved in and observes the service production

process, the outcome of the service transaction may be influenced by the customer .The potential input and process variability introduced by customers must be

considered during the SNPD.

3 . Heterogeneity .

Heterogeneity makes contact personnel central to effective delivery .

• First, because services are heterogeneous across time, organizations, and employees,considerable effort must be expended to assure that employees fully understand new

services and deliver them in ways consistent with the provider's vision of them . If

employees are unprepared, poor execution could threaten the commercialization of

new services . Ensuring consistent service quality is challenging because different

employees (and customers) interpret the service in different ways . Again, involving

employees and customers in the SNPD process may help .

•

Second, the development of robust service-delivery systems is important-thesesystems should be designed to accommodate some planned degree of variation in

inputs and processing.

4. Perishability .

Because many services cannot be inventoried, developers of new services must focus

on demand and capacity management issues .

• On the demand side, effective demand forecasting, methods to shift demand (for

example, via pricing), and systems to prioritize and allocate demand to available

supply (reservation systems, yield management systems) are helpful .

• On the capacity side, having service-delivery systems that can readily accommodate

varying demand volume is helpful . Multipurpose equipment, flexible facilities, and

service-delivery systems shared with other service products may help . Labor cross-

training and having additional labor available during peak demand periods may help

provide flexible capacity.

•

Capabilities on both demand and supply sides must be developed during the SNPD

rather than as a post service introduction afterthought . The issue of matching

supply and demand in services has received considerable attention (Sasser 1976 ;

Shemwell and Cronin 1994 ; Lovelock 1984b; Northcraft and Chase 1985 ; Kimes

1989a, 1989b) .


5. Another Issue : Imitability.

It is argued that services, due to their intangibility, are easily imitated by competitors .Several implications arise if this is true .

•

First, the firm should be able to rollout the same service product more widely andfaster than the competition . This gets at rapid speed-to-market via fast productintroduction and market launch.

•

Second, the firm should be able improve the service continually, either through newservices or continuous process innovation, to maintain competitive advantage . It isthe rate of improvement that is important. Systems can be developed during theSNPD process to collect information and assess areas meriting improvement once

the service is in operation.

•

Third, the firm can work to reduce the imitability of the service through marketing

and/or operational approaches . For example, building and relying on a favorable

brand reputation and corporate image may reduce imitability. Further, development

of hard-to-copy operational competencies such as personnel skills or proprietary

information, physical goods or processing technologies may also reduce imitability .

•

Fourth, legal barriers to imitation may be applied . It is argued that much of a new

service cannot be legally protected by patents or copyrights, therefore allowing

quick imitation by competitors. Nonetheless, some materials, equipment andprocesses can be protected, even if the service at large cannot .

Certain prescriptions emerge from Table 10 .1 . First, the abstractness of services

calls for "tangibdizing" the concept so the idea is clear to all parties . An emphasis on the

need for involvement of customers and service-delivery personnel-during the devel-opment process is noted, as is the importance of meaningful cross-functional involve-

ment of the service marketing and service operations functions . The need for service-

delivery systems to be designed to be robust, and also inherently amenable toimprovement, is highlighted .

THE OVERALL SNPD PROCESS

At a high level, the service development process can be described as consisting ofthree macro stages: the front end, the back end and product introduction . The front end

essentially chooses what service concept should be developed, the back end implements the

chosen service concept, and the product introduction opens the implemented service for

206 Technology-Based Product and Service Developme nt

use by actual customers . The three macro-stages and their elements are detailed in

Table 10 .2 . Front end steps are traditionally conducted by marketing, back end steps by

operations, and product introduction steps by both marketing (in product rollout, post-

introduction market evaluations) and operations (in managing the service during and

after its introduction) .The phenomena of product development processes having two qualitatively different

pre-introduction stages has been widely observed in PNPD (Smith and Reinertsen 1998 ;

Bacon et al . 1994) . The front end is often called "fuzzy" due to its relative abstractness,while the back end is acknowledged to be implementation and execution oriented (Khu-

rana and Rosenthal 1997 ; Tatikonda and Rosenthal 2000a; Tatikonda and Montoya-Weiss,

2001) . This chapter focuses primarily on the front end and back end stages .

Although there is a natural temporal sequence to the steps in Table 10 .2, the accom-

plishment of these steps in any real-life development project is rarely completely linear

(Ramaswamy 1996 ; Zeithaml and Bitner 2000 ; Tax and Stuart 1997) . There are many iter-

ations within and among steps ; steps are sometimes skipped, and steps are sometimes

conducted simultaneously (analogous to concurrent engineering in physical products) .

A number of services-specific prescriptive and descriptive process models have

been presented in the literature . These models generally capture in a more detailed

form the steps outlined in Table 10 .2 . Prescriptive models include Scheuing and John-

son's (1989) 15 step sequence of SNPD activities ; the "blueprinting" approach of

Shostack (1984a, 1984b) and Shostack and Kingman-Brundage (1991) ; and the health

care specific services development model by Bushman and Cooper (1980) and Cooper

and Butterbaugh (1993). Descriptive models (based on case studies, surveys or inter-

views with company personnel) include those by Bowers (1985, 1987, 1989) and Eas-

ingwood (1986) .

Positioning involves designing the company's offering so that it occupies a distinct

and valued position in the target customer's mind (Kotler 1991) . The service position is

what is in the customer's mind, whether or not it is the image planned or desired by the


TABLE 10.2 Archetypal Macro-Stages, Steps, and Elementsin the Service New Product Development Process .

Activity Elements

determine market opportunities or niches

define how a potential new service is different fromextant services

determine the congruence between a given marketopportunity or potential service and the company's

strategy and competencies

encourage and collect many ideas for a new servicethat may fill the market position

screen and refine the abstract ideas into a single, less

abstract service product concept

employ early prototypes (drawings, flowcharts) tocommunicate the concept to and obtain feedback

from stakeholders (including customers)

dearly define the service concept (via an iterative

process employing the early prototypes)

create implementation plans to physically realize theservice concept

•

develop personnel procedures and training ; design

and select supporting goods and materials ; designand test the service facilities (both front room and

back room); refine the overall sequence of steps in

the service-delivery process

iteratively develop and refine the overall service-delivery process model and specific elements ofthe service

test, in a real-world or simulated environment, the

complete fully implemented service-delivery processrollout the service to one or more sites (product

launch and market ramp-up)

analysis of market and operational results

continuous improvement of the service-deliverysystem

RESEARCH ISSUES IN THE FRONT END OF SNPD

•

This section discusses research issues in the front end of service development proj-

ects : service

idea generation, concept development and evaluation ; and usepositioning;

Full Prototype

•Tests

of formal marketing research .Product

Market Rollout

•

Introduction Performance

•

Service PositioningEvaluation

•

Macro-Stage

Major Steps

Strategic •Front End Positioning •

•

Idea Generation •

Concept •Development

•

•

Concept •Back End Implementation

208 Technology-Based Product and Service Develo pment

organization (Zeithaml, Parasuraman, and Berry 1992) . An organization or a particular

offering of an organization is successfully positioned if it has established and maintains

a distinctive and desirable place for itself in the consumer's mind relative to competing

organizations or offerings (Ries and Trout 1985) . If a service is successfully positioned,

the mention of the service will conjure up in the customer's mind an image that is dis-tinct from images of similar service offerings . The image, or position, that the organi-

zation chooses for the service will dictate to some extent the essential features and

design of the service-delivery process (see, for example, Shostack 1987) .Service positioning is critical in establishing an image for a proposed new service .

Ideally, positioning begins by examining how customers perceive proposed and or pres-

ent brands in a market (Aaker and Shansby 1982) . After understanding customer per-

ceptions of a market, a firm creates an offering or targets its existing offering to fall in aparticular location on the perceptual product map (for example, Stumpf 1976 ; Wind1982) . In the most effective instances of positioning, companies locate new products and

services near the ideal points of key customer segments, avoiding places where existing

brands already prevail and seeking underserved but desirable places . Positioning and tar-geting are important strategic functions in new product development because they

determine whether needs exist for potential new offerings and keep companies from

introducing "me-too" products in already too competitive marketplaces.

Positioning and targeting are used more frequently by product firms than by ser-

vice firms for several reasons- First, evidence indicates that service firms do less mar-keting research than goods firms (Lovelock 1984a), and positioning depends on market-

ing research (for example, perceptual mapping) approaches to locate brands in

perceptual space . Second, because services are intangible-and the criteria for themmore ambiguous-it is more difficult to define the consumer's perceptual space and

ideal points- Third, because services are heterogeneous, it is more difficult for service

marketers to identify the set of competing services that the customer views as relevant.

In all, it appears that service firms do not engage in service positioning and targeting fortheir new products to the degree that product firms do .

RESEARCH ISSUE : How should service companies position and differentiate them-

selves? Besides product maps, what tools are or could be effective in positioning a

given new service? What additional tools are needed? What are the bases for servicepositioning (as in Zeithaml, Parasuraman, and Berry 1992)?

Customers can have a difficult time grasping new service concepts . This ambiguity

leads to uncertainty, which reduces the willingness of consumers to try and use new ser-

vices . The more a service company possesses a known and positive image, the more suc-


cessful the new service will be . Related to the existence of image, new services that are

communicated with a distinct brand image and unique positioning were found to beclear winners over modest winners (Aaker and Shansby 1982; Ries and Trout 1985 ;Cooper et al . 1994) .

RESEARCH ISSUES : How can firms improve their service images in the context of

a new service? How can new services without service images compete with well-established brands?

Idea Generation, Concept Development,and Evaluation

Companies use various techniques for generating ideas and concepts . Some arequite familiar, such as brainstorming or free association . Others are more structured andspecific approaches such as structured brainstorming (Lueke and Suther 1991) . In struc-

tured brainstorming, a sample of customers and potential customers is assembled . A

facilitator leads the group through a series of exercises on creativity and then has thecustomers describe an ideal provider of the service . The facilitator probes "what" cus-

tomers want (to elicit fundamental requirements), "why" they want it (to elicit the

underlying need or benefit sought) and "how" they will know when they receive it (to

elicit specific service features) . Other types of concept research include : (1) featuresresearch, which involves environmental scanning and querying of customers about

desirable features of possible services ; (2) lead user research, which brings in customers

who are innovators or opinion leaders (von Hippel 1988) ; (3) synectics, which defines

lead users more broadly than in standard lead user research and allows them to refinepotential new concepts and ideas (Zeithaml and Bitner 2000) ; and (4) opportunity and

capability models, which act as decision mechanisms for determining the next steps a

business should take (Anderson 1987) .

As in PNPD, the customer is the user of the product, and so can aid in determiningwhat product best meets the customer's needs . Further, in many cases the customer is

part of the service-delivery system and so can provide ideas on their role in the service-

delivery process . Further, employees who deliver the service and interact directly with

customers are also sources of new service ideas . They have insight into what can and can-

not be delivered and where a proposed service-delivery process might break down . One

study indicates that 89 percent of the sampled companies claimed they experienced prob-

lems of either staff or customer confusion in introducing new services (Easingwood

1986) . The new service concept can be evaluated by asking employees whether they


understand the idea of the proposed service, whether they feel it satisfies an unmet

need, and whether they are favorable to the concept .

Once a new idea surfaces and is regarded to be a good fit with a firm's business and

positioning strategies, it is ready for initial development. In the case of a tangible prod-

uct, this would mean formulating the basic product definition and then presenting con-

sumers with descriptions and drawings to get their reactions. Drawing pictures and

describing an intangible service in concrete terms is difficult. It is therefore important

that agreement be reached at this stage on exactly what the concept is. After clear defi-

nition of the concept, it is important to produce a description of the service that repre-

sents its specific features and characteristics and then to determine initial customer and

customer-contact employee responses to the concept . A good service design document

would describe the problem addressed by the service, discuss the reasons for offering the

new service, itemize the service process and its benefits, and provide a rationale for pur-

chasing the service (Schueing and Johnson 1989) .

RESEARCH ISSUES : What other techniques are useful for generating new service

ideas? Can techniques be developed that overcome the challenges presented by ser-vice characteristics? What approaches are useful for translating abstract service

ideas into more defined service concepts?

How do firms currently involve service operations employees and, in particular,customer contact employees in the idea generation and concept development

stages? What mechanisms are most effective?

Use of Formal Marketing Informationand Research

The lack of understanding market needs was found to be the leading reason for new

product and service failure (Kuczmarski and Associates 1993) . In spite of this obvious and

well-understood fact, firms often use a hit-and-miss approach instead of a market-

oriented approach in developing new services (de Brentani 1993 ; Bowers 1985) . Rather

than depending on marketing research to determine the needs of the market, examine

the viability of new service concepts, and evaluate potential through test markets,

firms often create new services in a haphazard way (Schueing and Johnson 1989 ;

Shostack 1984a) . More often than not, new services are introduced on the basis of man-agers' and employees' subjective opinions about their design and potential rather than

on objective data about customer perceptions and market needs (de Brentani 1993 ;


Booms and Bitner 1981) . The intangibility characteristic of services is in large partresponsible for the tendency not to rely on market research .

Marketing Research in the Front End. Virtually all researchers whohave studied the topic agree that new services that meet existing and unserved needs ofcustomers are most likely to succeed (for example, Lovelock 1994 ; Zeithaml and Bitner2000 ; Tax and Stuart 1997) . The primary vehicle used to identify customer needs is col-lection of marketing research and information . Market research has been shown to beappropriate in the new service development process for confirming requirements for

the service, assessing points of value, testing delivery experience, propelling rapid learn-ing and concept iterations, identifying the variability in points of quality, analyzing the

impact in customers' processes, and customizing alternative approaches (Terrill andMiddlebrooks 1997) .

Marketing research appropriate for the front end typically includes qualitativeresearch techniques, such as focus groups or in-depth interviews, to probe the needs ofservice customers . These qualitative approaches are open-ended and ask potential cus-

tomers about existing and potential services, probing for attributes and benefits that aredesired but not available . In their purest forms, these studies are conducted with no pre-conceived ideas about what will be suggested by customers. In these situations, marketersare truly focused on customer needs and are using marketing research to identify them .

One of the most frequently used types of marketing research used in the front endphases is the concept test. Concept tests with physical products involve the presentationof photographic representatives or dummy advertisements of new products to poten-

tial customers . On the basis of the favorability of the product concept evaluations, firms

eliminate or retain and develop the concepts into prototypes . Because services are moredifficult to grasp mentally, concept tests are more difficult to do with services than with

products. Due to intangibility and the difficulty of describing services in a manner that

is clearly understood by respondents, concept tests tend to be less reliable for servicesthan for goods. For this reason and others (including perhaps a lower level of marketresearch sophistication), service firms rarely engage in concept tests .

Other types of research are appropriate after the initial developmental research has

been completed. Among the most useful are multidimensional scaling, which creates

product maps, and conjoint analysis, which investigates the customer's trade-offs amongproduct attributes (see Wind et al . 1989 for illustration of conjoint analysis applied toCourtyard by Marriott) . These research studies are not used as frequently as they couldor should be . The lack of market research has strong implications for the success of new

service projects . Studies have examined the extent to which market research and market

focus affect the success of new services (de Brentani 1993 ; Bowers 1985) . In a recent study


comparing highly successful versus modestly successful new service projects, financialresults showed that projects where customer needs, wants, and buying behavior were

understood; where adequate resources were devoted to market research ; and where mar-

ket research was used to test customer responses to the service strategy were more suc-

cessful (Cooper et al . 1994) . The same study showed that another measure of new service

success-relationship enhancement-was also strongly affected by a new service develop-ment process that included evaluation of customer needs and the use of market research .

RESEARCH ISSUES : What marketing research tools are most effective in deter-

mining the potential of new service concepts? What different tools are most appro-

priate for different service types?

Test Marketing. Later in the development process, a tangible product might

be introduced in a limited number of trading areas to determine marketplace accept-ance of the product and accompanying marketing mixed variables such as promotion,

pricing, and distribution vehicles . Bowers (1989) found that almost 69 percent of hospi-

tal administrators reported that they seldom or never engaged in the market testing of

new services. A variety of reasons have been offered for the tendency to ignore this

stage . First, many new services are introduced to complete a product line, and are there-

fore predetermined to be offered whether or not they succeed in a test market . Second,

many new services are introduced as copies or near copies of a competitor's existing

product, making speed to launch critical . Third, competitors could easily copy services

that were being test marketed, introducing them before the testing firm (Terrill 1992) .

Finally, the cost of a test market would not be appreciably less than the cost of a full

launch (Easingwood 1986) .When test markets are used for new services, they are typically conducted to

ensure proper functioning of service rather than to provide a base for national sales pro-

jections. "The intention is not at all to replicate a national launch on a local basis so as

to estimate customer response, as in a [traditional] test market, but more to make sure

the new [service] is operating correctly" (Easingwood 1986, p . 272) .

Despite the relative lack of test marketing with new services, researchers have

shown that the more successful service launches include this activity (Bowers 1985 ; Eas-

ingwood 1986 ; Shostack 1984a) . Terrill (1992) suggests that if imitability of the service

is a concern, that market research be conducted initially with internal customers before

services are taken to external markets .

RESEARCH ISSUES : How valid is test marketing with internal customers for pre-

dicting the success of a service with external customers? In what ways can test mar-


keting be accomplished without giving away new service concepts? What are low-

cost but effective techniques for test marketing?

RESEARCH ISSUES IN LINKING THE FRONTAND BACK ENDS OF SNPD

As we have noted, the service concept communicates, both to customers and ser-

vice providers, the overall intent of the proposed new service . In our view, the front endof the SNPD concludes when a single service concept is chosen, appropriately posi-tioned, and well defined . At this point, the back end commences in order to implementthe service concept . The back end develops the service-delivery system to realize the

service concept. This section addresses several important issues which arise in linking

the front and back ends .

First, we discuss the four major categories of elements that must be fully developedand implemented in the back end . These categories are (1) the overall service-deliveryprocess, and the (2) people, (3) goods, and (4) facilities elements of the overall service-

delivery process . Second, we discuss "internal newness"-the degree of change from

extant capabilities required in each category, and the implications of this newness interms of development challenges. Third, we introduce the very important notion of the"service architecture" as a means to link the front end and back ends . Fourth, we

describe the blueprinting and quality function deployment tools as possible means to

specify a service architecture .

Four Categories of Development Work

What major elements need to be developed and implemented in the back end of

the new service development process? A few essential categories can be derived from the

literature . The services marketing literature explains that the traditional "four Ps" of the

marketing mix for physical products (product, place, promotion, price) do not fully rep-resent services. And so, an additional three Ps-people, process, and physical evidence-

are added for services (Zeithaml and Bitner 2000) . Physical evidence includes support-

ing facilities and goods. In the service operations literature, Fitzsimmons and

Fitzsimmons (1998, p. 23) state: "a service is a package of explicit and implicit benefits

performed within a supporting facility and using facilitating goods." Some of the bene-fits, tangible and intangible, are provided by people . This definition of the service pack-

age considers what is provided, by whom, and with what supporting facilities or goods


to achieve the overall process-sequence of the service . Combining marketing and oper-

ations perspectives leads to our list of four essential categories of elements that must be

developed : the overall service-delivery process sequence, and the people, facilities, and

supporting goods pieces of that overall delivery process .

Newness as Degree of Change

The PNPD literature presents several frameworks for classifying the newness of a

physical product from the point of view of the development organization (Abernathy

and Clark 1985 ; Henderson and Clark 1990 ; Tatikonda and Rosenthal 2000b) . For exam-

ple, Wheelwright and Clark (1992a) classify new products as "breakthrough, platform,

or derivative" based on the degree of product technology and manufacturing process

technology change to be undertaken for the new product . They describe technology

change relative to existing technology with which the organization is familiar. This clas-

sification gives a rough sense of the development skills necessary and complexity to be

undertaken for that PNPD project .

A similar perspective is necessary for SNPD. An organization developing a new ser-

vice must understand the nature and amount of development work required for each

category. Having a sense of the "newness" of each category is helpful . We contrast new-

ness from the service provider's point of view with newness from the customer's per-

spective . The provider's sense of newness, what we call "internal newness," relates

closely to operational requirements while newness felt by the customer relates more

closely to market requirements.The internal newness indicates what needs to be changed in the service-delivery

process and how much. It is the degree of change from extant operational capabilities

of the firm and so identifies what must be developed rather than relied on from before .

We believe any new service can be described as some degree of change from a previ-

ous or existing service, where the degree of change may range from none at all, to a

minor or major modification, to a completely new service-delivery system . The sense

of change relative to existing systems is important because many new services share

their service-delivery system with existing services (Easingwood 1986 ; Tax and Stuart

1997), be it the company's own or one the company may license, purchase, or share .

This is analogous to a new physical good that is to be manufactured in an existing fac-

tory. The new good may be produced on existing or modified manufacturing equip-

ment, and so shares part of the production system with existing or prior goods .

To link the front end and back end of SNPD, and to have the back end commencein the most effective manner, we believe an organization must determine the degree of


newness for each of the four categories. Each category should be described per the

degree of change from extant operational capabilities of the firm, which in turn identi-fies the capabilities that must be developed and implemented .

The Notion of a "Service Architecture"

In PNPD, the implementation challenge (that is, the work of the back end) is to

develop a manufacturing process that economically produces a quality product in vol-ume. The SNPD implementation challenge is similar-devising a delivery system toproduce the service as it was conceived, at reasonable cost, in a reasonable amount oftime, and at necessary volumes .

We suggest that a clear understanding of the "service architecture" for a given new

service would aid greatly in linking the traditionally marketing-oriented front end withthe traditionally operationally-oriented back end of SNPD. The service architecture aidsin converting the service concept into a viable service-delivery process by translating theservice concept into a plan for achieving the service concept. The service architecturepartitions the development work of the back end into the four major categories . Thatis, the service architecture operationalizes the service concept by : specifying the majorelements of each of the four categories to be developed in the back end ; stating thedegree of change from previous operational capabilities for each category ; and provid-ing implementation plans for each category The implementation plans detail specificdevelopment activities and resources for implementation of each category.

The notion of a product architecture has gained attention in the PNPD literature(Ulrich 1995 ; Baldwin and Clark 1997; Meyer and Lehnerd 1997 ; Smith and Reinertsen1998 ; Tatikonda 1999) . The product architecture is the scheme that identifies and organ-izes the major elements of the product, and states how these elements interact (Ulrichand Eppinger 2000) . The architecture also serves to partition and disaggregate the over-

all development work into relatively substantial pieces . Each piece may be developed orsourced by different specialists or groups .

To illustrate our notion of the service architecture and its four categories, we bor-

row a well-known, simple example of a service blueprint-that of the corner shoeshinestand (Shostack and Kingman-Brundage 1991, p . 244) . The first category is the overallservice-delivery process sequence. This involves specifying the key execution steps in theservice-delivery process : brushing the shoes, applying polish, buffing the shoes, and col-lecting payment . The people category involves, among other things, determining whowill perform which shoeshine tasks, and what skills and training are required to do so .The facilitating goods category involves determining what goods are required for each


step (for example, polish, cloth), and selecting and sourcing these goods. The support-

ing facility category involves, among other things, design and selection of the customer

shoeshine chair, signage, and other furnishings of the shoeshine stand . If the shoeshiner

keeps an appointment calendar or accounts book (electronic or physical), then that con-

stitutes the information technology aspect of the supporting facilityA complete service architecture would list the elements that need to be developed

in each category, identify how new these elements are with respect to extant operational

capabilities, and specify what resources would be used in what manner to develop these

new elements. The back end then develops and implements the four categories, in time

resolving any uncertainty about each .

The amount of newness and development effort in each category are decision vari-

ables for the development organization . Choices made regarding each category affectthe performance of other categories and the overall service-delivery system . Accord-ingly, appropriate selection of the elements in each category is required, as is coordina-

tion of the development of the multiple categories . Further, each new service will nec-

essarily have a unique emphasis on different categories . For example, not all newservices will require the same amount of development effort in the people category.This is dependent on the degree of change required in each category to satisfactorily

achieve the service concept.

How should a firm go about deriving the architecture for a new service? Doing so

requires specifying the overall service-delivery process, and its major elements, in a waythat the overall process and its pieces can be effectively and feasibly developed . The ser-

vice concept must be translated into implementable components . The blueprinting

approach may be used to specify or derive a service architecture, although otherapproaches [for example, quality function deployment (QFD) (Behara and Chase 1993 ;

Stuart and Tax 1996 ; Ramaswamy 1996)] may also apply

We assert that a service architecture is key to successful new service development

because it helps translate the service concept into an implementable service-delivery

system . But we are aware of no study of how companies systematically determine ser-

vice architectures (if at all) and what tools they use to do so .

RESEARCH ISSUES : How often do firms specify a service architecture for their

products? What specific tools or approaches are employed in practice to developservice architectures . How do these approaches vary for different types of services?

How often are structured processes used to specify service architectures? What is

the frequency of usage of blueprinting and quality function deployment (QFD)

techniques for developing service architectures?

What are the most effective means for translating the service concept into a set of

partitioned and feasible development subtasks? What other tools or refinements of


existing tools would increase the effectiveness of service concept translation into

implementation plans? More generally, what other cross-functional techniques or

approaches should be developed or adapted to bridge the front and back ends?

Can QFD and blueprinting be applied together to aid in cross-functional determi-

nation of the service architecture? How can QFD processes and blueprinting tech-niques be integrated to gain synergies from both approaches?

RESEARCH ISSUES IN THE BACK END OF SNPD

This section discusses research issues in the development and implementation ofthe four categories of elements in the back end of SNPD : supporting facilities (frontroom, back room, and the coordination of the two) ; personnel (both employees andcustomers) ; facilitating goods, and the overall service-delivery process sequence .

Supporting Facility

The supporting facility refers to all fixed physical (including electronic) resourcesnecessary for provision of the service . Interior elements, exterior elements, and locationissues have traditionally been considered aspects of the supporting facility for a branch-

type service . We add information technology to this list. Interior elements that may be

considered and developed include : facility layout (both front room and back room), sup-

porting equipment (see the section on facilitating goods), furnishings, signage, and inte-rior decoration and design . Exterior elements include : exterior decoration and design,landscaping, architectural appropriateness, signage and parking . The primary location

issue involves determining where to locate the service facilities, and typically requires

consideration of space and land requirements in conjunction with analysis of the loca-tion of customers, suppliers and supporting services. Information technology includesboth electronic and physical hardware and software that enable the communication and

information processing requirements of the service organization-Here we focus on the interior facility. The supporting facility for the service is often

described as having a front room and back room . The key distinctions between facilitiesin SNPD and PNPD are : (1) services have a front room, while physical products do not;and (2) development of the front room and back room requires close coordination .

The front room and back room can be, but are not always, located in the samephysical location . The back room is largely isolated from the customer and has a strongefficiency orientation . Although the back room is rarely seen by the customer, it can

influence service performance and customer satisfaction .

2 1 8 Technology-Based Product and Service Development

The back room resembles traditional manufacturing operations, and so can be

designed and managed as such (Chase and Tansik 1983) . Traditional operations analysis

and industrial engineering techniques (including process flow charting (Kimes and

Mutkowski 1989) for design of the physical conversion process and physical layout read

ily apply (Chase, Aquilano, and Jacobs 1998) . Development of the back room differs

from traditional manufacturing plant development for physical products in that the back

room has an associated front room, and must be developed in coordination with the

front room. The SNPD process must assure this coordination . Further, once the service

is introduced, the ongoing service must have coordinated operation of the front room

and back room .The customer interacts with the service organization in the front room . Although

much of the back room development is operational in nature, development of the front

room requires both operations and marketing perspectives . Types of factors to consider

in front room design include the functional, operational objectives of the new service ;

customer participation in the service process ; and the aesthetics and ambiance of the

service facility. The degree of customer contact and involvement with the service

provider creates opportunities and constraints on the design and layout of the front

room facility (Schmenner 1986 ; Chase and Tansik 1983) . After all, the front room is

where customers "experience the sights, sounds, smells, attitudes, actions, and other

cues of the service context" (Haeckel and Carbone 1996, p . 9) . The interaction of cus-

tomer and service provider has been called the "service encounter ." The interaction of

customer and provider results in one or more "moments of truth" where the customer

evaluates the service (Normann 1984) . The service encounter need not be left to

chance-it can be designed (Collier 1996 ; Fitzsimmons and Fitzsimmons 2000). The

reality of customer contact calls for application of behavioral approaches in addition to

traditional operations process flow analyses .

One behavioral issue is the "psychology" of waiting lines (Maister 1985)-how to

manage human queues to "entertain, enlighten, and engage" the customer rather than

frustrate them (Katz, Larson, and Larson 1991) . Some principles include acknowledging

the customer when he or she enters the service facility, and providing pleasant and

informative distractions while the customer waits for service . These approaches are

used in addition to classical analytical queueing models (Davis 1991 ; Davis and Maggard

1990, 1994) for service process design . Another behavioral issue involves design of the

facility to reduce disorientation of the customer, and has been referred to as managing

the "environmental psychology" of the service (Wener 1985) . This involves putting in

place cues to help the customer understand the service process . For example, a bank or

fast food restaurant can have the physical layout of the front room designed to make it

very clear where a customer should line up for service or go for supporting materials .

The issues of service environment, waiting line psychology, customers' learned scripts


(see "personnel" in the next section), and customer co-production of the service all tie

together and can be supported through appropriate front room facility design .Other front room design issues arising from customer contact include personnel

and customer training, and personnel selection and rewards (see "personnel" in the nextsection) . Further, means to reducing personnel and customer errors, or unnecessaryvariability in the process, are helpful . These include "fail-safing" methods (Chase andStewart 1994), which are applications of Japanese poka yoke principles in the servicecontext.

Several frameworks have been presented to aid in service facility design . Schmen-ner (1986) classifies service facilities based on two dimensions : level of interaction withthe customer and degree of customization of the product . Wemmerlov (1990) addressesfacility design and process choice by considering these two dimensions in addition to theprimary "what" that gets processed : goods (for example, a dry cleaning service), infor-mation or images (for example, ATM cash withdrawal), or people (for example, haircut,medical operation) . Bitner (1992) considers the degree of customer involvement anddegree of complexity of the facility (ranging from lean to elaborate) . Each frameworksuggests design implications and prescriptions for the respective service type .

RESEARCH ISSUES : What aspects of the front room are most critical in deliveringcustomer and employee satisfaction? What methods are most effective for coordi-

nating the simultaneous and integrated development of the front room and back

room? How should the front room and service encounter be designed when thefront room is primarily computer-mediated (for example, ATM machine or Webpage for product sales)?

Personnel

It is generally acknowledged that selecting and motivating personnel is a key man-agerial challenge in services (Schneider and Bowen 1993) . Here we address the "devel-opment of people" in the context of the new service . "People" refers to customer con-tact personnel, backroom personnel, other service personnel (for example, those whoserve the servers), service managers, and customers . "Development" refers to recruit-ing, selecting, training, motivating, rewarding, and providing feedback to the people .

Regarding personnel selection, Schneider and Schechter (1991) advocate evaluationof potential hires along two dimensions : service competencies (skills) and service inclina-tion (willingness to do services work) . The ideal candidate scores highly on both dimen-sions . Regarding training, personnel require understanding of. (1) the service-delivery sys-tem as a whole ; (2) the work procedures for an individual's specific job ; (3) work

220 Technology-Based Produc t and Service Development

procedures for multiple jobs (if cross-training is an objective) ; (4) techniques for interact-

ing with customers ; and (5) means to use real-time customer and other feedback for ser-

vice recovery and improvement .Personnel can gain realistic training through full-scale physical prototypes . These

include prototypes for internal customers only, as seen in fast food, retailing, and hospi-

tality industries. "The Lab," McDonald's R and D facility in Illinois, contains a full scale

prototype restaurant which serves hourly employees (Horovitz 1998) .

Human resource literature in services argues the benefits of empowering service

employees. This can be achieved by allowing personnel to have autonomy in their work

and through provision of training in work tools (particularly computer information sys-tems to aid in service delivery and real-time problem resolution) (Schneider and Schechter

1991 ; Bowen and Lawler 1992) .

Many service employees are boundary spanners, bridging the service organization

and the customer. These employees need training in interpersonal skills to assure satis-

fying service encounters (Mill 1986 ; Bitner, Booms, and Mohr 1994) . Customers per-

ceive higher service performance when employees feel that the service organization and

management have a strong service orientation (Schneider 1980) . Employee satisfaction

and perceptions of a positive internal organizational environment lead to higher per-

ceived service value and customer satisfaction (Heskett et al . 1994) . An organization's

high level of "culture for service" in turn motivates employees to work with a strong

service quality focus (Schneider 1986) . Training (or acculturation through other meth-

ods) regarding the organizational vision may be necessary Some have even suggested

that service employees should be treated as customers (Berry 1981 ; Bowers, Martin, and

Luker 1990) . The attitudes and willingness of customer contact employees to partici-

pate positively in a new service introduction can influence development success . It is

argued that "far more so than for physical products, the launch of intangible products

such as financial services is intimately tied to the customer contact people and their

skills : these people almost become the product" (Cooper et al . 1994, p. 296) .

There is a significant literature on human resources issues in the context of ongo-

ing, existing services . However, human resources issues in the specific context of new

services appears largely unexplored .

RESEARCH Issues : How should firms go about recruiting, selecting, training, and

motivating personnel in the context of new services (versus ongoing services)? What

is different about personnel development for new services versus existing services?

When are new personnel (those new to the company or service situation) moreappropriate than established personnel (those familiar with the previous service or

a similar service)? How should firms select, train and motivate new personnel ver-


sus established personnel for a new service? How do firms involve established

customer-contact employees in the service implementation stages?

How is personnel development best conducted in an ongoing service situation

(where current services continue to be offered)? This is analogous to ramping-up anew product in a factory that also has responsibility for manufacture of currentproducts .

Explore employee reward systems in the context of new services . Determine howsuch systems need to be different from reward systems for ongoing services . Deter-mine how to appropriately balance rewards for ongoing versus new services .

Management training is also necessary. In contrast to traditional PNPD, SNPDrequires development of managers of the people who interact with customers . Further,for services that are intended for mass rollout (for example, same service to multiple

sites), large volumes of managers trained in some standardized fashion may be required .

RESEARCH Issues : What are the most effective means for training managers fornew services?

Customers must also be "developed" because customers learn routines and rolesthey play in different service situations (Solomon, et al . 1985). These "scripts" are in partdefined by previous service experiences and social norms . A new service that requiresdifferent customer roles in turn requires customer training or socialization (for example,

through signage, brochures, advertising, direct service personnel intervention, or phys-

ical layout cues) on how to accomplish the new role (Kelley, Donnelley, and Skinner1990) . This is a service design decision-in some cases a new service can be designedwith little or no need for new customer scripts- Further, customers can be co-producersof the service (Lovelock and Young 1979) . They influence the service-delivery processand in turn influence service quality and their own satisfaction levels . Accordingly, it ishelpful to view customers as "partial employees" of the firm (Mills and Morris 1986),and to design the service so that the customer's "job" is well defined (Chase 1978 ; Mills,Chase, and Margulies 1983) . The notion that the customer is really an employee sug-

gests the use of employee management methods and ideas to assure role or task clarity,appropriate tools to aid in task performance, and motivation in the form of appropriaterewards for task performance . All of these are service design and implementation vari-ables at least in part under management's control . Customers (or some meaningful cus-tomer proxy) can be involved throughout the service development process to help

define their service needs and their role in the service-delivery process (Kelley, Donnel-ley, and Skinner 1990) .


RESEARCH ISSUES : How do companies involve customers in their SNPD

processes? How should customers be involved for maximum effectiveness? Are dif-ferent types of customer involvement appropriate for different customer classes

and different service types?

When can or should divergence from established scripts be avoided? What areeffective methods for the design of services having varying levels of divergence

from established scripts?

Facilitating Goods

Facilitating goods are physical goods employed in the service-delivery process

which may or may not be seen by the customer. For a fast food restaurant, facilitating

goods include relatively permanent physical goods such as cooking equipment and cus-

tomer tables ; consumable materials such as order slips, packaging, raw materials (e .g .,

uncooked french fries) ; and items that aid in communication such as menus, employeeuniforms, and facility signage . Facilitating goods in services share many aspects of :(1) product development for physical goods, and (2) supplier selection, inventory man-

agement and distribution issues of physical goods.

Physical Product Development. Because a facilitating good is a tangible,

physical good, it can be developed using largely traditional PNPD processes (see Wheel-

wright and Clark 1992b ; Rosenthal 1992 ; and Ulrich and Eppinger 2000 for excellent dis-cussion of PNPD at the project level) . Nonetheless, a facilitating good differs from justany physical good in that it is part of the service-delivery system, and so has a role in

contributing to overall service system effectiveness . The facilitating good should sup-

port the system in a functional sense, but must also be congruent with the system in anaesthetic sense . Some facilitating goods are visible to the customer and so enhance or

detract from the intended ambience of the service . Accordingly, during the early devel-

opment stages of the facilitating good, there needs to be a strong emphasis on usability

and human interaction with the good (since customers or employees may use the item) .

Early customer feedback about that facilitating good is also called for . The tools ofindustrial design (Lorenz 1990 ; Norman 1990; Adler and Winograd 1992) andergonomic design apply (Kroemer, Kroemer, and Kroemer-Elbert 1994) . See Coughlin

(1993) for a case description of the development of chinaware for British Airways' first-

class cabin, and see Blank and Lawrence (1988) for description of the development ofthe Federal Express hand-held tracker .


RESEARCH ISSUES : Should industrial design, ergonomic design, and related

"human-oriented" design approaches differ for facilitating goods in services versusgeneric physical goods? What are the SNPD implications of these differences?

Development of a facilitating good for a service may be more challenging than thedevelopment of a typical physical good because the facilitating good must fit within the

overall service-delivery system . There are potentially more interactions between that

good and other system elements . These interactions must be accounted for and

designed . Therefore, integration of the good into the broader system (both the overallprocess and other elements such as people, facility, and other facilitating goods) is nec-

essary. This may be achieved through careful and integrated original specification of the

good, and through ongoing monitoring of the good's development to make sure the

physical product continues to meet service system-level integration requirements .

RESEARCH ISSUES: Determine the most effective means to coordinate different

types of service facilitating goods in the context of development of the overallservice-delivery system .

It appears that different types of facilitating goods may have different implicationsfor physical development of the good. For example, in the case of placemats for a fast

food restaurant, the major development implementation challenge may simply be print-

ing. Beverage cups may be purchased in an commodity-like manner on the open mar-

ket . In contrast, development of a beverage dispensing machine may require a substan-tial PNPD process (or perhaps none at all if it is an industrial product which is simply

purchased) . Development of worker uniforms may require both considerable user input

(regarding comfort and functionality) and aesthetic input from service designers andcustomers (since uniforms contribute to the overall service image) .

RESEARCH ISSUES : Future research should classify facilitating goods in new ser-

vices in terms of their development characteristics because different types of facil-itating goods may require different types of PNPD processes .

Supplier Selection, Inventory Management, and Distribution .Developing and acquiring facilitating goods for a new service involves many of the sameissues that arise in developing and acquiring physical parts for a new physical good .

Firms must determine what to design and develop in-house versus outsource (Clark

1989; Clark and Fujimoto 1991). If outsourcing is chosen, then vendors must be

224 Te chn ology-Based Product and Service Development

provided appropriate physical product specifications so that vendors can produce the

intended good. Vendor selection, screening, quality control, and quality assurance issues

also hold for new service development. Implementation of vendor communication sys .

tems such as EDI may be necessary. Development of suppliers, such as aiding suppliers

so they may gain essential skills in producing the goods, may be required . "The opening

of the first McDonald's in Moscow required substantial supplier development . Manage-ment not only had to build a commissary to prepare all products for the restaurant, but

also had to show farmers how to plant and harvest the crops that were needed (for exam-

ple, potatoes and lettuce)" (Fitzsimmons and Fitzsimmons 1998, p . 467) .

Also necessary is development of inventory ordering, storage, and control policies

and systems for the facilitating goods . Much traditional inventory management theory

and the philosophies of supply-chain management apply here (Vollmann, Berry, and

Whybark 1997) . Development of a physical distribution system to transport facilitating

goods may be necessary. This includes physical distribution of goods the company owns

or controls, distribution of goods from vendors, distribution of goods among service

sites, and "take back" of materials from service sites .

RESEARCH ISSUES : Explore how issues of supplier selection, supplier develop-

ment, and supply-chain logistics differ for facilitating goods in new services versus

physical goods alone . Determine implications for SNPD .

Service-Delivery Process Sequence

Prototypes. The blueprinting technique described earlier can be used to design

and evaluate, on paper, the proposed service-delivery process in terms of: specific exe-

cution steps; the sequence of steps ; flow of materials, information and people (both cus-

tomers and employees) ; and other support elements such as equipment and facility

requirements .Blueprinting is referred to as a "prototyping" tool because it leads to an approxi-

mation or representation of the proposed new service . The PNPD literature notes that

many types of prototyping tools exist, and that they differ in their objectives, scope, tan-

gibility, analytical depth, and location of use in the development process (for discussion

of different types of prototypes see Ulrich and Eppinger 2000, Chapter 12; Wheelwright

and Clark 1992b, Chapter 10 ; and Bowen et al . 1995, Chapter 7) . Here we differentiate

prototypes along two dimensions : scope and physicality. Regarding scope, prototypes

range from complete service-delivery system prototypes (for example, system level

blueprints or a full-scale model retail store) to prototypes for a small part of the overall


process . These elemental prototypes are used to express and evaluate a piece within thelarger system (for example, a single facilitating good) . Regarding physicality, prototypesrange from very abstract to very tangible. An abstract prototype may be described orallyin broad terms . A less abstract prototype is described on paper via pictures and flowcharts(such as a blueprint) . The most tangible prototype is the actual service-delivery process,with all its facilitating goods, supporting facility, and personnel in place . The example ofa working McDonald's restaurant is a system-level, fully physical prototype .

RESEARCH ISSUES : Develop a complete conceptual classification of the differenttypes of prototyping tools applicable to services. Determine the effectiveness ofthese different tools for different types of services, at different stages in the SNPD

process, and for different SNPD objectives . Develop new prototyping tools forthose service situations that require improved tools .

Prototype Iteration . Here we focus on system level prototypes. First, systemlevel prototypes are typically revised many times during the SNPD process as ideasprogress, more information is gained, and consensus achieved . Second, although creat-ing a system level prototype may be costly, it does provide benefits in terms of assessing

overall service system performance and feasibility. Some firms introduce the serviceproduct to actual customers, and then revise subsequent versions of the service productas they introduce the product more widely. Here, the product introduction not only gar-ners real sales, but also serves as a full-scale field prototype .

RESEARCH ISSUES : What different strategies for the prototyping process are

appropriate under different service development conditions? When should systemlevel physical prototypes be tested internally versus at an actual field site? When is

a system level prototype ready for rollout?

"Design for Implementation" Principles . Design for manufacturability(DFM) guidelines, and the more specific design for assembly (DFA) guidelines, are

employed during the concept evaluation and product architecture development stagesof physical products . These guidelines help assure ease of product manufacture, which

in turn leads to lower development costs, shorter production times, and higher productquality and reliability (Nevins and Whitney 1989 ; Boothroyd and Dewhurst 1987 ;Andreasen, Kahler, and Lund 1983) . A substantial literature, and even software support,exists in the area of DFM and DFA for physical products .

An analogue to DFM and DFA principles in the SNPD context is a set of rules orsuggestions we call design for implementation (DFI) principles. These principles would

2 2 6 Technology-Based Product and Service Development

guide service concept evaluation, service architecture development, and both overall

and detailed design of the service-delivery process sequence . Such principles would help

assess and assure the feasibility and consistency of the service-delivery process . Forexample, one DFI principle is to consider, during service concept evaluation and archi-

tecture development, the degree of change required for each of the four back end cate-

gories . This involves evaluating whether an aspect of the proposed service leverages

existing service operations

rapa .. i licapabilities or would requireq,,irP nP~

na..bi- sties . A sN.s delivery _bt...__

.zr _ ar _c_

ond principle would be to apply fail-safing techniques (Chase and Stewart 1994) once a

high-level process sequence is chosen for the service . Such guidelines help increase the

repetitive quality of the process . Another principle would be to have a bias for simpler

rather than complex service-delivery mechanisms (Hagel 1988) . This is analogous to the

DFA guideline to "minimize the number of parts." These three principles are merely

representative . In general, development of DFI principles for services deserves consid-erable attention. Such principles, like DFA guidelines, should be widely applicable but

may hold greatest potential for services that are to be rolled out to many sites .

RESEARCH ISSUES : Assess the degree of applicability of physical products DFMand DFA principles to service contexts. Modify physical products' principles as

necessary

Develop a systematic, generalized set of DFI principles to increase ease of imple-

mentation of the service concept. Determine how DFI guidelines must vary for dif-

ferent service types and service-delivery elements . Assess whether application of

DFI principles is more beneficial for replicated (multi-site) services than for single-

location services.

Determine general costs and constraints associated with application of DFI prin-

ciples . Assess the organizational challenges of implementing and utilizing DFI

principles .

CONCLUSIONS

This chapter identified areas for future research on new service development .

Although the increasing importance of new service development is now widely recog-

nized, development of new services has not received the broad attention that develop-

ment of physical goods has . To determine relevant areas for research, we drew on and

reviewed literature from multiple disciplines including service operations, services mar-

keting, and product innovation . This fundamentally cross-functional activity requiressuch a multidisciplinary perspective .


The chapter first addressed archetypal characteristics of services which in turn sug-

gested that the development process for services must differ from that for physical goodsin a number of important ways . The chapter then described the steps and stages in theservice development process, and explained that development projects have qualitatively

different objectives in the early stages (the front end) and later stages (the back end) of

the development process . Research questions on the front end topics of service position-

ing, idea generation and evaluation, and the use of formal marketing research were pre-sented. Questions addressing the linkage of the traditionally marketing-oriented frontend with the typically operationally-oriented back end were then identified . We intro-duced our concept of the "service architecture" as a means to aid this linkage . Researchissues were then presented regarding back end topics-the development of service per-sonnel, facilitating goods, supporting facilities, and the overall service-delivery process

sequence . We introduced our notion of "design for implementation principles" to guide

development of an easy-to-implement and highly repeatable service-delivery process .

Finally, research issues regarding organizational coordination and integration were posed,including questions on the use of structured development processes, cross-functional ser-

vice development groups, and dedicated service development personnel and groups . Atheme that arose throughout the chapter was the need for integration of multiple func-tional perspectives .

This chapter covered considerable ground by addressing in some detail researchissues that span the front and back ends of individual new service development projects .Still, there are many salient issues regarding service innovation that are beyond thescope of this chapter. Perhaps most important is software development and informationtechnology development in the context of new services. After all, software is theenabling technology for many services . The role of structured development processes,

dedicated teams, cross-functional teams, and organizational coordination in generalmerit study. Other research areas include planning of service product platforms, fami-lies, and portfolios ; designing services for mass customization ; the unbundling,bundling, and centralization of service operations ; research and development of service

technologies, process automation, and electronic delivery channels ; and the role of ser-vice innovation in the overall competitive strategy of the firm . Another area is the useof post-audits and post-launch reviews to assess completed new service development

projects . The development of systems to capture continuous operational and market

information (including customer satisfaction) on an implemented service is an impor-tant area. Such systems would aid in performance measurement and continuous

improvement, and support service guarantees and service recovery .This chapter presented a substantial agenda for inquiry on new service develop-

ment. We believe research on the issues raised would greatly increase both theoretical

and practical understanding of this essential management process .

228 Technology-Based Product and Service D evelopment

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NEWDIRECTIONS,nSupplyChainII

1

11Technology,Strategy, and

Implementation

Tonya Boone, Ph .D .Ram Ganeshan, Ph .D .

AMACOMAmerican Management Association

New York • Atlanta • Brussels • Buenos Aires • Chicago • London • Mexico CitySan Francisco • Shanghai • Tokyo • Toronto • Washington, D . C .

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Library of Congress Cataloging-in-Publication Data

New directions in supply-chain and technology management : technology, strategy, andimplementation / [edited by] Tonya Boone, Ram Ganeshan .

p . cm .

A collection of 16 revised papers first presented at the two day Barren Young ScholarsForum hosted by the School of Business, College of William and Mary, in early July 2000 .Includes indexISBN 0-8144-0637-8

I . Business logistics-Congresses . 1 . Boone, Tonya . II. Ganeshan, Ram . III . BattenYoung Scholars Forum (2000 . College of William and Mary)

HD38 .5 N477 2002658 .5-dc21

2001053743

(c/ 2002 AMACOM, a division of American Management Association, New York .All rights reserved .Printed in the United States of America

This publication may not be reproduced,stored in a retrieval system,or transmitted in whole or in part,in any form or by any means, electronic,mechanical, photocopying, recording, or otherwise,without the prior written permission of AMACOM,a division of American Management Association,1601 Broadway, New York, NY 10019 .

Printing number

10987654321

Contents

Prefaceix

Section 1 : Integrating New Technologies into Supply-Chain Operations

v

1 . The Relationship-Technology Interface : A Path to Competitive Advantage

3

Sandy D.Jap

2 . Digital Marketplaces and Efficient Supply Chains : Can They Co-Exist?

24

Ram Ganeshan and Katherine Gehman

3 . Internet Retailers' Dilemma of Operational and Market Efficiencies

39

Joseph P Bailey and Elliot Rabinovich

Contents Contents vii

4 . A Case Study of an ERP Implementation: Promises, Phantoms, 13 . Antecedents and Performance Outcomes of International Subsidiaries'

and Purgatory

Gigi G . Kelly

58 Technology Sourcing Decisions

K. Scott Swan, Brent Allred, and Aldor Lanctot

282

Web-Enabling the Supply Chain : An Exploratory Case Study 73 14 . Pricing Supply Flexibility . The Impact of Variability and Information

Ram Ganeshan Asymmetry

Alexander O. Brown

306

Section 2 : Technology-Based Product and Service Development1> . Vendor-Managed Inventory in Production Constrained Settings

Michael Fry, Roman Kapuscinski, and Tava Lennon Olsen

325

Identifying and Managing Programmatic Efficiency Differences

across Technology-Based Product Development Capabilities16. Supply-Chain Integration : Putting Humpry Dumpty Back Together Again 352

and Uncertainty EnvironmentsK . Scott Swan

93Geoffrey G . Parker and Edward G. Anderson Jr.

7 . Management of Information Technology Driven Product Development Index 377

Processes 125Nitin R . Joglekar and Ali A . Yassine About the Contributors 381

8. Mass Customization : Strategic and Operational Considerations

Rebecca Duray

9 . Towards Effective Software Development : A Conceptual Framework of

153

Software Project Types, Development Processes, and Functional Outcomes

Mohan V Tatikonda and Maia Lorence

10 . Managing the New Service Development Process : Multi-Disciplinary

171

Literature Synthesis and Directions for Future Research

Mohan V Tatikonda and Valerie A . Zeithaml

200

Section 3 : Knowledge Management and Supply Chain

Integration Issues

11 . Inward Technology Transfer : A Key Link in the Technology Supply ChainMohan V Tatikonda and Gregory N. Stock

237

12 . Experience-Based Productivity Improvements in Project Environments

Tonya Boone272

managing the new service development process: multi...

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