Appunti per il primo parziale dell'opzionale di New Product Development And Open Innovation

MANAGING INNOVATION IN SERVICES: THE NEW SERVICE DEVELOPMENT PROCESS

Transforming an idea in a product or in a service is quite similar: you have an idea, that passes or not through the stages of the stage-gate process.

There are specific characteristics for services that make them very different from products, that have to be considered when you plan or design a new service:

• Intangibility: the outcome of the production process is often intangible. You cannot touch them before you purchase them. Something that makes more difficult (compared to products) evaluate what you are buying.
• Flexibility of execution: something that is more flexible, that can be changed while it is being delivered.
• Heterogeneity: the relative inability to standardize the output of services as compared to goods (that must be absolutely the same). Every time the service is different.
• Perishability: the relative inability to inventory services as compared to goods.
• Inseparability: services are interactive and are

simultaneously produced and consumed.
- Un-stackable: you cannot stock services. Services exist only when they are delivered. There is always a customer on the other side. →
- There is no transfer of ownership: I do not own the service (like car-sharing the car is not mine). In product I usually own the product.
Main features: services are a series of activities that create value for the customers. "The application of specialized competences (skills and knowledge), through deeds, processes, and performances for the benefit of another entity or the entity itself (self-service)".
Services might be provided directly or indirectly, i.e. through the provision of tangible goods.
Strong relationship between goods and services → "solutions".
Today, the difference between products and services is old fashion, because many products include services to be used and vice versa (e.g. bank account).
What does the term quality mean?
Quality is the ability of a product or service to

Consistently meet or exceed customer expectations. A firm in order to compete successfully must have an understanding of consumer perception of the quality and the way service quality is influenced.

Service quality components

Services are much more complex in terms of quality then the products, because we don't have a single object to measure in advance and we don't have a reference on performance in term of time: the What's are the technical qualities and the How's are all the aspects that influence the perceived quality.

Technical quality: for example, the teaching material of a course.

There are other aspects of quality that are independent from the technical quality.

Example: air travel→Technical quality the time, the schedule, the seats and the conditions at which you travel.→Relational and communication quality how the personal, the website… communicate with you. It is easy to communicate with the company or not? Or for example the real price of

the process. How easy is to buy the ticket. →Economical quality not only a matter of cost (price of the ticket) but also the psychological cost (how much does it take to get in contact with somebody, how much does it take to understand how to postpone a flight…). It is the entire experience and how much does it cost to you. →How to convey the idea of courtesy, security and understanding the customer in privacy Privacy lines (planning of the layout) in order to guarantee the privacy of the customer. Often services are an exchange of information and the status of the customer in

Solving the problem. 34→The moment of truth = any moment in which you get in contact with the organization, in any form you never get a second chance to make a first good impression.

A moment of truth (or service encounter) is an instance where the customer come into contact with the organization (personnel, equipment, environment,…) in a manner that gives him/her an opportunity to either form or change an impression about the firm.

There are a lot of moments of truth.

Example: moments of truth in a hotel →Reception: how I find the reception I can get a good or bad impression how the receptionists are dressed, how they talk, speed of registration…

Cleanness of the place

Behavior of the other host; how they are: influence by other customers

The hall, the interior…

The service encounter: could be any remote encounters (webpage, phone encounters), face-to-face encounters, facilities, … It is an opportunity to:

• Build trust
• Reinforce quality
• Build brand

1. Identity - Increase loyalty
2. New service development process

The new service development process is similar to the new product development process: there is a divergent phase, that is based on look at a business opportunity and generate ideas, and a convergent phase that transform these ideas into the different steps:

1. Idea screening
2. Concept development and testing
3. Business analysis: the business plan
4. Development: layout and the process itself
5. Testing
6. Commercialization

How the services distinctive features affect the new service development process?

1. Intangibility - it is not possible to taste, feel, see, hear or smell services before they are purchased or experienced.

From the company point of view: they can have a lot of possibilities in creating different services and different alternatives of services. Proliferation of new services (relatively easy to create compared to physical products, i.e. different ticket fares, options, conditions, ...).

Attention to:

intangibility can be managed in not creating confusion among customers and operational staff.
2. Heterogeneity difficulties to judge quality in advance of purchase. There is no "standard" service, it depends on who provide the service, when it is provided, which is the level of personalization,...
- There are some situations highly dependent on the type of customer such as hire car or life insurance (price and services covered may vary a lot).
- Difficult to create accurate concept descriptions and problems in concept testing.
- Create criteria of standardization (cluster) to reduce the complexity, and "sell" this variety as a customization for the customer.
3. Inseparability the equipment and/or people who "produce" the service may be highly visible to consumers (the reception, the hall, the restaurant, if it is clean or not: this is the equipment, what you see forms your perception of quality).
- The consumers' perceptions can beaffected by the physical aspects of the service and the attitude, behavior, language, appearance of people involved in the service delivery (the operational staff). Even if the service is well designed, if the person in front of you is not interested in solving your problem, the service is perceived as bad in service business you have to train and form front desk people. - In service businesses the operations staff perform an operational and a marketing role: because they are delivering a service (operational people) and they are in front of customers that could have different needs (marketing role: try to solve different problems). - The quality of some personal services depends on the availability of the customer and her/his capability to express her/his needs (i.e. dental or medical treatment: the customer has to describe what they are feeling, professional services,...). - Example: there was a tendency in restaurants to show the kitchen: increasing visibility to influence the perception of cleanliness and quality of the food.

Perceived quality, because people feel that nothing is hidden from them.

Perishability services cannot be stored. For example, spare seats on a flight or empty hotel room are capacity lost forever if they are not consumed when they are available. The problem arrives when you have fluctuation in the demand of services: this can intensify the perishability effect (like a lot of people in the weekends and nobody/few people during the week). Problem of evaluating how to manage the capacity.

Managerial decision on capacity planning (maximum and on average) and demand management through special promotions or differential pricing for example higher prices in the weekends. Try to reduce the peak of demand and distribute people in different days with different prices. Example: McDonald's has temporary personnel in peak hours.

How to plan a good service? Provocative sentence that means: let's select the aspects on which you want to focus on and then the others are not the

aspects on which you are competing on. Because excelling in all aspects of services inquite difficult.

Strategic implications of the dimensions of quality:

• Pursue a selective quality niche (which are the aspects in which your service is different from the competitors). To distinguish your product or service from those of your competitors, use some but not all of the dimensions of quality. (It is unwise and often impossible to pursue excellence in all dimensions.)
• Conduct market research to determine which of the dimensions of quality are most important to the customers that you want to serve. Do not introduce or persist with dimensions of quality that are unimportant to your customers.

Designing a new service: what to consider 37

Three elements that depend on the company (internal: the offering, the funding mechanism and the employee management system) and one element that depends on the customer's behavior (external: customer management system).

1. The offering: which is the technical office,
ffering of convenience and accessibility to their customers. They compromise on other areas such as the number of physical branches or the range of financial products they offer. This matches up with their targeted customers' priorities of convenience and time-saving.