Paul Trott, Innovation Management and New Product Development, 4 th Edition, © Pearson Education Limited 2008 Slide 14.1 Chapter 14 New service innovation.

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008

Slide 14.1

Chapter 14

New service innovation


Slide 14.2

1. Introduction2. Growth in services3. Technology and new services4. Characteristics of services5. Customer relationship process6. New service innovations7. NSD process8. Summary & recap

New service development (NSD)


Slide 14.3

Introduction

• Growth in services• Characteristics of services

Services are processes where customer is part of it• Viewed differently to products• Services contribute to new business models:

eBay new way of conducting businessRyanair new way of flyingAmazon new way of viewing and buying booksNapster new way to buy music


Slide 14.4

Within the EU services now account for 60% of GDP (Eurostat, 2006).

Growth in knowledge intensive business services (KIBS)

Growth in services – but what does this mean?

huge growth in coffee bars, smoothie bars and hair salons?

Since 2003, shares in oil companies have doubled.

Halliburton and Schlumberger, the world market leader for oil services, have more than tripled.


Slide 14.5

cleaners, decorators, maintenance workers, canteen staff, etc

would now purchase the services of road and rail transport.

So, a company that was earlier employing

Growth in services – but what doesthis mean? (Continued)


Slide 14.6

Outsourcing and service growth

Expected gains that companies can derive from outsourcing include:

• the reduction of operational costs;• the ability to transform fixed costs into variable costs;• the ability to focus on core competencies;• access to the industry-leading external competencies

and expertise.


Slide 14.7

Business-to- business services (traditional)

Business-to- business services (KIBS)

Consumer services

Internal firm services

Public services

Not-for-profit services

Description Services provided for businesses

Specialist services provided to businesses

Services provided to individuals

Services provided by internal functions

Services provided by local and national government

Services provided by charities

Examples AccountancyLegal adviceTraining

Management consultancyIT consultancy

ShopsHotelsBankingHealth and beauty

FinancePersonnelIT

HealthEducationLeisurePrisons

HospicesCounsellingAid agencies

Customers Frequently purchased by professionals, who may not be end users

Frequently purchased by professionals, who may not be end users

Purchased by consumer of the service

Consumers of the service have no choice of provider

Funded through taxation and little choice for consumer

Funded through charities maybe government grants consumers chosen or choose.

Challenges Providing high-quality tailored and personal service

Providing high quality services to businesses who have high purchasing power

Providing a consistent service to a wide variety of customers

Delivering customised, personal service. And demonstrating value for money.

Delivering acceptable public services against a backcloth of political pressures.

Balancing needs of volunteers, donors and overwhelming needs of customers.

Typology of services


Slide 14.8

Technology and new service development

Technology has become the most significant enabler of innovation in services.

Transforming the roles of both employees and customers.

Easing the connectivity between service developers andcustomers.

E.g. ebay . . .


Slide 14.9

Founded in September 1995

eBay, Inc. is possibly the most successful web-based enterprise in existence.

Four service dimensions

Illustration

New service concept On-line auction community of traders

New client interface Introduction of payment system that helps eBayers trade more easily – Paypal

New service delivery system

Huge investment in technology infrastructure to improve reliability and performance

Technological options Introduction of voice over internet protocol service – SKYPE

Technology and new servicedevelopment (Continued)


Slide 14.10

Company Industry sector New service/new business model

eBay On-line auction A new way of buying and selling through a community of individual users

Ryanair Airline A new way of consuming air-travel with no frills service and emphasis on economy

Amazon Retailer New way to buy goods – on-line retailer

Napster; iTunes

Music retailer New way to buy and download music

Google Internet search engine

A fast way to search for information on the internet

Partygaming On-line gambling Gambling and gaming from the comfort of your own home

Myspace Social networking A community of users on-line who can chat and share music, images, news from their own home

You-Tube On-line video and film archive

A community of users sharing home made video clips plus recorded favourite clips from movies

A range of new services that also create new business models, where technology plays a key role


Slide 14.11

Services areprocesses

Services areco-producedby the customer

Services areintangible

Services areperishableServices cannot

be transported

Services areproduced andconsumedsimultaneously

Services areheterogeneous

Characteristics of Services


Slide 14.12

The customer relationship process

Servicesmarketing

Servicequality

Relationshipquality

Servicevalue

Customersatisfaction

Customerretention

Customervalue


Slide 14.13


As with products service, innovations can be classifiedin many ways: • eBay was new to the market; Google’s on-line auction

is new to Google;• Internal process innovations, e.g. Amazon: delivering

books to consumer is not new, but using internet;• Line extensions to services, e.g. banks offering

insurance;• Service modifications, e.g internet access to airline

passengers.


Slide 14.14

Booz et al. (1982) Lovelock (1984)

New to the world products: new products that not only represent a major new challenge to the supplier, but which are also seen to be quite new in the eyes of customers

Major innovation: new services for markets as yet undefined; innovations usually driven by information and computer-based technologies

New product lines: new products which represent major new challenges to the supplier

Start-up business: new services in a market that is already served by existing services

Additions to existing product lines: new products that supplement a company’s established product lines, so rounding out the product mix

New services for the market presently served: new service offerings to existing customers of an organisation (although the services may be available from other companies)

Improvements and revisions to existing products: new products that provide improved performance and so replace existing products

Service line extensions: augmentations of the existing service line such as adding new menu items, new routes and new courses

Repositionings: existing products that are targeted to new markets or market segments

Service improvements: changes in feature of services that currently are being offered

Cost reductions: new products that provide similar performance at a lower cost of supply

Style changes: the most common of all “new services”; modest forms of visible changes that have an impact on customer perceptions, emotions and attitudes, with style changes that do not change the service fundamentally, only its appearance

Typology for innovations (Ozdemir, 2007)


Slide 14.15

Customer roles in NPD (Nambisan, 2002)

Customer role NPD phase

Customer as resource

Ideation

Customer as co-creator

Design and development

Customer as user Product testingProduct support


Slide 14.16

The service innovation process

Different from NPD: customer is part of the process

• Blueprinting the service Identify every activity and every possible outcome in the process• ‘Prick-eared’ market research

Direct contact facilitates dialogue• Service prototypes

Difficult because customer is part of processLevel of integration determines ability to prototype

E.g. a doctor’s home visita visit to the cinema


Slide 14.17

Customer interaction process

CustomerServiceprovider

Customer roles

Encountermanagement

Critical incidents

Serviceencounter

Determinants


Slide 14.18

Perceived service quality . . .Perceived service value . . .Customer expectations . . .

How do customers evaluate services?

• Reliability• Responsiveness• Assurance• Empathy• Tangibles


Slide 14.19

• Reliability– Providing service as promised– Dependability in handling customers’ problems– Performing services right first time– Performing services at the promised time– Maintaining error free records

• Responsiveness– Keeping customer informed when service will be performed– Prompt service to customers– Willingness to help customers– Readiness to respond to customers’ requests

• Assurance– Employees who instil confidence in customers– Making customers feel safe in their transactions– Employees who are consistently courteous– Employees who have knowledge to answer questions


Slide 14.20

• Empathy– Giving customers individual attention– Employees who deal with customers in a caring manner– Having the customers best interests at heart– Employees who understand the needs of their customers– Convenient business hours

• Tangibles– Modern equipment– Visually appealing facilities– Employees who have neat, professional appearance– Visually appealing materials associated with service


Slide 14.21

1. Pure tangible good2. Tangible good with accompanying services3. Hybrid4. Major service with accompanying minor goods

and services5. Pure service

Categories of service mix


Slide 14.22


For many years the literature overlooked this concept!Innovation deemed to require a new physical “thing”But, the world of business suggested new services coulddeliver even more significant changes (new businessmodels):

First DirectRyanaireBayApple’s iTunes


Slide 14.23

The End

Thank you for listening

Paul Trott, Innovation Management and New Product Development, 4 th Edition, © Pearson Education Limited 2008 Slide 14.1 Chapter 14 New service innovation.

Documents

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new service innovation