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New Service Development

Service Innovation

Service Design and Service Package 

Service Design Examples

Shin‐Ming GuoNKUST

I. Innovation in Services

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Idea Generation: Customers, Employees, Competitors, Technology

Basic Research: Pursue a planned search for new knowledge regardless of possible application. (number theory)

Applied Research: Apply existing knowledge to problems in creation of new service. (security coding)

Development: Apply knowledge to problems to improve a current service. (on‐line shopping)

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New Service Development Cycle

Technology-Driven Service Innovations

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Source of Technology

Service Example Service Industry Impact

Power/energy Jet aircraft Electric vehicles

International flight is feasibleBattery charging/exchange

Facility design Hotel atriumEnclosed stadium

Feeling of grandeur/spaciousnessYear‐around use

Materials Digital cameraSynthetic engine oil 

Photo printing/TourismFewer oil changes

Methods Just‐in‐time (JIT)Da Vinci surgery

Reduce supply‐chain inventoriesSurgeons and quality improvement

Information e‐commerceInternet

Increase market to world‐wideVideo on demand

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Zipcar: Refining the Business Model

Service Concept: provides short‐term, on‐demand use of private cars conveniently located and easily accessible to customers. 

Target Market: People living in big cities where public transportation is established, parking is expensive, and the need to drive is limited. 

https://www.youtube.com/watch?v=cX2xJOo5LIs

II. Service Design

Customer Participation

Simultaneity

Perishability

Intangibility

Heterogeneity

Supporting Facility

Facilitating Goods

Information

Explicit Services

Implicit Services

location, interior design

capacity planning, waiting line management

service encounter

revenue management

service blueprint, service recovery

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Service Design Elements

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Design Elements Topics

Structural

Delivery system Process structure, service blueprint, strategic positioning

Facility design Servicescapes, architecture, process flows, layout

Location Geographic demand, site selection, location strategy

Capacity planning Strategic role, queuing models, planning criteria

Managerial

Information Technology, scalability, use of Internet

Quality Measurement, design quality, recovery, tools, six‐sigma

Service encounter Encounter triad, culture, supply relationships, outsourcing

Managing capacity & demand

Strategies, yield management, queue management

Service Design: Shouldice Hospital

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Service Package for Car Sharing

Supporting Facility:  office, parking space, maintenance center.  

Facilitating Goods:  membership card, cars, recorder, gasoline.  

Information:  web site, reservation system, driving records.

Explicit Services:  cleanliness, convenience. 

Implicit Services:  247 availability, environmental friendly service. 

Operational Decisions

1. Who can use the service?

2. How to select and reserve a car?

3. How to get access to the car?

4. What about refueling?

5. How to return the car?

6. How to charge?

7. What about maintenance?

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Strategic Positioning via Process Structure

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Degree of Complexity:  Measured by the number of steps in the service process, e.g., a clinic is less complex than a general hospital

Degree of Divergence:  Amount of discretion permitted the server to customize the service, e.g., the activities of an attorney contrasted with those of a legal assistant

Controlling Complexity

• One‐stop service results in lower complexity.

• Focused strategy must be unique or of very high quality.

• Adding more services to increase revenue from each customer creates high complexity.

• Superstores with banking, flower shops, and food service complicate the management process.

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Service Process Matrix: Divergence

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Cus

tom

er c

onta

ctDivergence

Structural Alternatives for a Restaurant

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No Reservation

Take Reservation

Table Selection

Self-seating Seat guestsSeat guests

Recite menu

Fills out order Take orders Take orders

Personal service

Call numberServe

dinner setsSeparate-course

service

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III. Process Design: Service Blueprinting

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Failsafing (pokayokes)

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Service Encounter = moments of truth

Every customer contact is an opportunity to satisfy the customer.

To improve customers’ perception of service quality.

Service failures are often caused by interruptions or negligence.

Task to be done

Treatment accorded to the customer

Tangible features of the service

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Swim Lane Flowchart (for low contact service)

A visual representation that groups functional areas responsible for different sub‐processes into lanes.

All functions contributing to this process are included in the flowchart. 

The columns represent different departments or functional areas, and 

the steps appear in the department column where they are performed. 

The customer is also shown as one of the column headings.

Special dotted‐line arrows show the handoffs from one department to 

another when the outgoing arrow from a step goes to another column.

Handoffs are points where cross‐functional coordination is at particular 

risk

Zipcar: Service Process Design

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Customer Interaction: Information Technology

• Mobile technology enables vehicle reservation and usage.

• Wireless transmission authorizes users, read odometer, mileages, and time stamps.

Support Process: Maintenance and Relocating

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Increasing Customer Value

𝑉𝑎𝑙𝑢𝑒Process quality Results produced

Cost of acquiring the service Price to the customer

𝑉𝑎𝑙𝑢𝑒Qualit𝑦

Cost

Business Collaboration for Car Sharing

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IV. Generic Service Design Example 1

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Production Line  Treat the service as a manufacturing process

Focus on tangibles, not people

Low divergence (standardization)  uniform quality

Low contact  cost and consistent quality

Technology fool‐proofing equipment and service flow

Generic Service Design Example 2

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Customer as Co‐Producer  having customers taking a greater role enhances the service

Self service  cost, speed, convenience, high divergence

Substitute Technology for People  247 service availability

Appointments and reservations

Customers generated content Wiki, e‐markets

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Generic Service Design Example 3

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Customer Contact  how to achieve efficiency with customer participation

Separation of high and low contact operations

Employee empowerment + Keep track of customers’ preferences  High Complexity, High Divergence

Sales opportunities via customer relationship  Service Encounter, Service Guarantee

Challenges for Service Design

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Limited ability to protect intellectual properties.

Definition of the intangibles.

Incremental nature of innovations.

Limited ability to build prototypes or conduct tests

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Conclusion

• The process is the product.   

• Service‐system matrix ≈ product‐process matrix

• Service blueprint ≈ process flow chart

• Inventory and scheduling are often not available to service operations.

• Expect and manage variability of service encounter

• Parts of the service packages are defined by the training and treatment the workers receive.

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