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New Service Development

Service Innovation

Service Design and Service Package 

Service Design Examples

Shin‐Ming GuoNKUST

Review: Service Package

Supporting Facility:  The physical resources that must be in place before a service can be sold.  

Facilitating Goods:  The material consumed by the buyer or items provided by the consumer.  

Information:  Operations data or information that is provided to enable efficient and customized service.

Explicit Services:  Benefits readily observable by the senses.  The essential or intrinsic features. 

Implicit Services:  Psychological benefits or extrinsic features which the consumer may sense only vaguely. 

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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)

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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Case Study: Car Sharing

Best suited to urban locations where there was a dense base of potential users, parking was expensive, and the need to drive was limited.

Big hole in the rental market: short‐term, on‐demand private car access. 

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

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Information Technology for Car Sharing

• Mobile technology enables vehicle reservation and usage.

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

Challenges for Service Innovation

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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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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

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

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Facility Design: Shouldice Hospital

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. 

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Managerial Decisions

• How to select and reserve a car?

• How to get access to the car?

• What about refueling?

• How to return the car?

• How to charge?

• What about maintenance?

Maintenance and Support for Car Sharing

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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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Strategic Positioning via Process Structure

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Degree of Complexity:  Measured by the number of steps in the service blueprint, 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 paralegal

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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Service Process Matrix: Divergence

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Service Blueprinting: Complexity

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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

III. Generic Approaches to Service Design

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Production‐line• Low Divergence• Service Flow• Cost and Consistent Quality

Customer as Co‐Producer• Low Complexity, High Divergence• Substitute Technology for People• Cost and Convenience

Customer Contact• High Complexity, High Divergence• Service Encounter, Service Guarantee• High Performance Quality, Dependability

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Service Design Example 1

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Production Line  Treat the service as a manufacturing process

Focus on tangibles, not people

Standardization  uniform quality

Low contact  high efficiency

Technology fool‐proofing equipment and process

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, customization

247 service  availability

Appointments and reservations

Customers generated content Wiki, e‐markets

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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 

total customization of service

Sales opportunities via personal relationship

Guidelines for Successful Service Design

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1. Define the service package in detail

2. Focus on customer’s perspective (expectation and perception)

3. Recognize that designer’s perspective is different from the customer’s perspective

4. Define quality for tangible and intangibles elements

5. Make sure that recruitment, training, and rewards are consistent with service expectations

6. Establish procedures to handle exceptions

7. Establish systems to monitor service

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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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