Service Development Design & Standards

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Service Development Design & Standards

Types of New Services

  • Radical Innovations
    • Definition: Completely new services that create a new market or drastically change the way existing markets operate.
    • Example: Federal Express’s guaranteed overnight courier delivery, which revolutionized package delivery by guaranteeing fast service.
  • New Services to Existing Customers
    • Definition: Introducing new services to an existing customer base that already uses similar services from the company.
    • Example: Barnes & Noble, initially a bookstore, adding coffee shops to its stores to enhance the customer experience and offer additional value.
  • Service-Line Extensions
    • Definition: Expanding the range of services within an existing service line to attract new customers or provide additional options to current customers.
    • Example: An airline adding new routes to expand its network and offer more destinations to its passengers.
  • Service Improvements
    • Definition: Enhancements or upgrades to existing services to increase their value or meet evolving customer expectations.
    • Example: Hotels adding internet access to rooms to meet the growing demand for connectivity.
  • Style Changes
    • Definition: Modifications to the appearance, design, or presentation of the service to refresh its image or better align with customer preferences.
    • Example: Redesigning a website, changing a company’s logo, or updating the decor of a physical store.

Reasons for Failure and Success of New Services

Reasons for Failure:

  • No Unique Benefits Offered: The service does not provide distinctive or additional value compared to existing offerings.
  • Insufficient Demand: There is not enough interest or need in the market to support the new service.
  • Unrealistic Performance Goals: The service has goals that are overly ambitious or not achievable.
  • Poor Fit with Organization’s Portfolio: The new service does not align well with the company’s existing services or strategy.
  • Poor Location: The service is offered in an area where there is little to no demand.
  • Insufficient Financial Backing: Lack of adequate funding to support development and marketing.
  • Failure to Take Necessary Time: Rushing the development process without proper planning and testing.

Reasons for Success:

  • Meets Customer Needs: The service addresses a clear need or solves a problem for customers.
  • Competitive Advantage: Offers benefits or features that distinguish it from competitors.
  • Technologically Sophisticated: Utilizes advanced technology to enhance the service experience.
  • Strong Support Infrastructure: Adequate R&D, marketing, and operational resources are available to develop and launch the service.
  • Market Readiness: The market is prepared for the new service, with demand and acceptance likely.

Characteristics of New Service Development

According to Professor G. L. Shostack:

  • Objective: The development process should be based on measurable criteria rather than subjective opinions.
  • Precise: The process should be clear and specific, avoiding ambiguity.
  • Fact-Driven: Decisions should be based on factual data and evidence.
  • Methodological: The approach should follow a structured and systematic method.

Stages in New Service Development

  • Business Strategy Review
    • Purpose: Align the new service with the company's overall vision, mission, and strategic goals.
    • Focus Areas:
      • Value Disciplines:
        • Operational Excellence: Focus on efficiency and cost leadership.
        • Product/Service Leadership: Offer innovative services with a strong brand.
        • Customer Intimacy: Provide exceptional customer service and attention.
      • Generic Strategies:
        • Cost Leadership: Become the lowest cost provider.
        • Differentiation: Offer unique benefits not provided by competitors.
        • Focus: Target a specific niche or segment.
  • Developing New Service Strategy
    • Purpose: Define how the company will grow and align the new service with this growth strategy.
    • Growth Strategies:
      • Intensive Growth: Increase market share with existing services or expand to new markets.
      • Integrative Growth: Form partnerships, alliances, or acquisitions to enhance service delivery.
      • Diversification: Launch new services in new markets, which is riskier but can offer substantial opportunities if managed well.
  • Idea Generation
    • Purpose: Generate and evaluate new service ideas.
    • Activities:
      • Brainstorming: Creative sessions to come up with new ideas.
      • Focus Groups: Discussions with customers to gather insights and feedback.
      • Observation: Studying customer behavior and competitors.
      • Suggestion Boxes: Collecting ideas from employees and customers.
    • Evaluation: Assessing the feasibility and potential market for the ideas.
  • Service Concept Development
    • Purpose: Define and refine the service concept.
    • Activities:
      • Description: Outline the value, form, function, and customer experience.
      • Involvement: Engage customers, employees, and other stakeholders in developing and testing the concept.
      • Blueprinting: Create a detailed service process map to visualize and plan service delivery.
  • Developing the Business Case
    • Purpose: Validate the service concept and ensure it is profitable.
    • Activities:
      • Feasibility Analysis: Assess financial viability and market potential.
      • ROI/ROCE: Ensure the service provides a return on investment above the bank interest rate.
      • Approval: Obtain management and investor support.
  • Service Development and Testing
    • Purpose: Develop and test the service prototype.
    • Activities:
      • Development: Create the service and refine it based on feedback.
      • Testing: Pilot the service with real customers to gather insights and make adjustments.
  • Market Testing
    • Purpose: Evaluate the service in a real market setting.
    • Activities:
      • Pilot Testing: Offer the service to a limited audience and gather feedback.
      • Adjustments: Modify the service based on pilot results and customer feedback.
  • Commercialisation
    • Purpose: Launch the service broadly.
    • Activities:
      • Rollout: Introduce the service in phases, starting with less risky markets.
      • Employee Training: Ensure staff are well-informed and motivated.
      • Ongoing Monitoring: Track service performance and customer feedback to make continuous improvements.
  • Post-Launch Evaluation
    • Purpose: Assess and refine the service after it has been launched.
    • Activities:
      • Review: Regularly evaluate service performance and customer satisfaction.
      • Adaptation: Make changes based on evolving customer needs and market conditions.
      • Efficiency Improvement: Seek ways to enhance service efficiency and customer benefits.

Service Blueprinting

  • Purpose: Visualize and plan the service delivery process.
  • Components:
    • Frontstage (Customer Interaction): All customer-facing elements of the service, such as interactions with staff and visible processes.
    • Backstage (Employee Actions): Behind-the-scenes activities that support service delivery but are not visible to customers.
    • Support Processes: Additional functions and systems that support service delivery, like IT systems or supply chain management.

Example: A restaurant blueprint might include customer seating areas, kitchen operations, and service staff actions to ensure a smooth dining experience and identify potential areas for improvement.

This detailed overview covers the key aspects of service design, development, and delivery, helping organizations create, implement, and manage new services effectively.