Service Innovation: New Service Development
Sung Joo Bae
Associate Professor
Operations and Technology Management
Yonsei University Business School
Service is becoming increasingly important
• The paradigm is shifting to service-oriented industry structure
– Service sector is larger than 60% in OECD nations
– USA: 82% of GDP (2006)
• Service sector grows in South Korea as well
– Experiments not easily testable in a large sample
Source: KIDP
Service is becoming increasingly important
Source: KIDP
Manufacturing firms shifting towards service
• IBM: sold PC division, focus on consulting/service
• GE: restructuring focused on finance, healthcare, NBC Universal
• SONY: 27% of revenue coming from game, movie, and finance
• Xerox: copier document management solution
• Apple: product(iPod, iPhone) + service (iTunes, Appstore) integrated platform
Source: KIDP
Important characteristics of service
We need to visualize & standardize customer-interface in order to provide valuable experience for the customers.
Intangibility
Visualization
Heterogeneity
Standardization
Inseparability
Touch Point
Perishability
Experience, Value
Source: Service Management, 2002 (in Korean)
Touch Point
• Physical, interpersonal, virtual
• E.g. product, advertisement, web site, smartphone app, salesperson, store, point of purchase(POP) device, receipts………
• Customers formulate their perception about the service and the service provider based on their experience at touch points
• Touch point not only affects current customers but also future customers
Source: KIDP & JH Son
Every contact points between a customer and the service provider
Two things matter in considering “Touch Point”
• Taking customer perspective as well as operation
• Focus rather than details
Source: KIDP, JH Son
Orininal Source: JH Kim (Customer Satisfaction Management, 2007)
Customer
Bathrooms should be nearby
Business center should be nearby
Enough rooms for chatting
Snacks & coffee
Quick breaks should not interfere
Manager at convention center
Warm coffee at the right moment
Fresh snacks
Neat and clean space
Clean table and dishes
Things to consider for the break time during the seminar at the convention center
Important characteristics of service
We need to visualize & standardize customer-interface in order to provide valuable experience for the customers.
Intangibility
Visualization
Heterogeneity
Standardization
Inseparability
Touch Point
Perishability
Experience, Value
Source: Service Management, 2002 (in Korean)
Creating a better service experience
• Service Design
• Service Science
• Service Engineering
Source: KIDP
3 principles of service design
• Carefully observe all the experience the customers go through when they use the service
• Visualize and make the service tangible
• Define a service concept that generates real values
Source: KIDP & JH Son
Insight Concept Process
Carefully observe all the experience of the customers
Carefully observe all the experience of the Customers
Ethnography
• Ethnography is a branch of anthropology. It is a methodological strategy used to provide descriptions of human societies. Direct observation is the most common method of data collection.
• Empathic Design is a way to elicit latent user needs by observing them in the actual use context.
– Unarticulated needs, Use environment, User
customization, Intangible attributes of products
(Source: Leonard & Rayport)
Carefully observe all the experience of the Customers
1. Plan the study • When, where, who, how long, how (covert or overt)
2. Identify participants
3. Observe participants
• Why? Original use? What expectations? Any emotion? Any confusion or misuse?
• Things to record: date, time, place of observation, facts and details, sensory impressions, personal responses, specific words or phrases, questions for future investigation
4. Interview participants – with open-ended questions
5. Collect artifacts – pictures or videos, process map
6. Analyze data
7. Verify hypothesis – interviews, focus groups, survey
8. Document findings
Ethnography
Carefully observe all the experience of the Customers
Source: KIDP & Engine
Carefully observe all the experience of the Customers
Source: KIDP & Engine
Carefully observe all the experience of the Customers
Source: KIDP & Engine
Carefully observe all the experience of the Customers
Source: KIDP & Engine
Carefully observe all the experience of the Customers
Source: KIDP & Engine
Visualize & make the service tangible
Visualize and make the service tangible
Visualize and make the service tangible
Source: KIDP & JH Son
Visualize and make the service tangible
Customer Experience Map
• The journey of customers using the service is visualized sequentially and longitudinally
• Touch points can be physical, interpersonal, or virtual
• The nature of service is represented from the customer’s view
• Quite similar to the scenario for movie-making
Structured visualization of a service user’s experience
Source: KIDP & JH Son
Visualize and make the service tangible
How to draw an “Experience Map”
• Identify the touch point where users interact with the service
– Define the touch points from user insights
– Methods to find user insights: Observation, Shadowing, Interview, Blog, Video diaries, Life in a day
• Details are important to provide real insights
• To gain emotional identification, use personas (virtual profile)
• Customer participation is sometimes used in order to gain more realistic results
Source: KIDP & JH Son
Visualize and make the service tangible
The purpose of “Experience Map” • Provides a high-level-overview of the factors influencing user
experience, constructed from the user’s perspective.
• Identifying both problem areas and opportunities for innovation
• Customer participation is sometimes used in order to gain more realistic results
Source: KIDP & JH Son
Visualize and make the service tangible
Simple Experience Map for using restaurant
Source: KIDP & JH Son
예시 2) 유로철도 고객경험맵
Define a service concept that generates real values
After you identify a problem or an opportunity…
• Need for developing a solution emerges
• Need for laying out what the service provider can offer meeting the need emerges
• Need for laying out the details emerges
– Front stage & back stage processes
– Support processes
– Different stakeholders and touch points for improvement
Source: KIDP
Define a service concept that generates real values
Front stage & back stage
Source: KIDP & JH Son
Front stage Back stage
Define a service concept that generates real values
Front stage & Back stage
Source: Glushko, 2008; KIDP & JH Son
Define a service concept that generates real values
Front stage & Back stage
Source: KIDP & JH Son
Front stage Back stage
• The front stage represents the interaction the customer or service consumer has with the service
• The front stage service interface can be an employee, in a high-contact service, or a user interface, as in a self-service encounter with a computer or machine application
• Design goals: • Usability • Responsiveness • Flexibility/Customization • Transparency • Enjoyment
• The back stage operates on raw materials or information to create the finished products or processed information needed by the front stage
• "Industrialization" of the back stage to achieve efficiencies and economies of scale inevitably simplifies the front
• Design goals: • Efficiency/Productivity • Robustness • Standardization/Reuse • Scaleability
Define a service concept that generates real values
Service Blueprints • Incorporating the perspectives of both user, the service provider
and other relevant parties that may be involved
• Detailing everything from the points of customer contact to behind-the-scenes processes
• A collaborative workshop is a very effective way for this kind of co-creation, as this is an great and ideal way to bring together the various perspectives
• Blueprint ideally should be periodically revised to be a “living” document
Source: KIDP & JH Son
Define a service concept that generates real values
Service Blueprints • Physical evidence: all the physical factors
surrounding the interaction, affecting the communication and performance
• Customer actions: sequential; things provided to customers or customer participation in service
• Onstage employee actions: direct interaction between the customer and the service provider
• Backstage employee actions: employee actions invisible to the customer
• Support processes: connection to other parts of service provider
Source: Bitner, 2007; KIDP & JH Son
Define a service concept that generates real values
Service Blueprints
Source: Bitner, 2007; KIDP & JH Son
Define a service concept that generates real values
Service Blueprints
Source: Bitner, 2007; KIDP & JH Son
Define a service concept that generates real values
Cross-functional research is critical for developing and implementing service blueprints
Source: Bitner, 2007; KIDP & JH Son
• Front stage perspective
– Designer, Marketing researcher, Marketer, Service Employee
• Back stage perspective
– Operations Manager, Technician, Logistics Specialists
Case: elBulli – The Taste of Innovation
Video: elBulli’s Innovation in Taste
What elements of the elBulli experience create value for customers?
(These are the reasons why elBulli was the best restaurant in the world)
Constructing Experience
Reservation Trip Tour Meal Service
Scarcity Effort Access Innovation Exclusivity
What are the most salient features of the creative process at elBulli?
Innovation Process
Catalog of Thought Generating Techniques
• Deconstruction: Taking it apart, putting them back together in a new way
• Six senses: Irony, humor, provocation, childhood memories
• Adaptation: Revising recipes from traditional/classic cuisine
• Minimalism
• Haute cuisine version of mass-market items
• Influence from other cuisine
• Senses as the starting point to create
• Symbios of sweet and salted world
• New ways of serving food
• Techniques & concepts applied to new products
• …
Progression of Economic Value
Extract
Commodities
Make
Goods
Deliver
Services
Stage
Experiences
Pricing Market Premium
Relevant to
Irrelevant to
Needs of
Customers
Competitive
Position
Differentiated
Undifferentiated
Frisholt Experience
Facts about Frisholt
• Built in: 1925
• Established as guest residence in: 1967
• Guests: Customers, partners, subsidiary
employees, consultants
• Dining guests: 4,500 per year
• Overnight guests: 2,500 per year
• Facilities: 24 rooms, 2 dinging rooms, 3 bars,
karaoke, conference room, billiards, table tennis,
multi-purpose chapel, golf course with putting
green and driving range, pentaque, multi-purpose
game room
Frisholt Experience
Kano Model
Kano Model
Why models of product innovation, especially the experimentation approach, doesn’t easily apply to the service innovation?
• Service is intangible, and realized only at the moment of delivery to the customer
– Not easily isolatable in a traditional laboratory
• Many services are individually tailored at the point of purchase
– Experiments not easily testable in a large sample
Case: Bank of America
Iterations Reveal New Information to Improve Upon
Experimentation allows quick iterations in a controlled way, so that the iterations results in a more robust findings
Design Build Test
Design
Build
Experiment
Build
Product Innovation
Service Innovation
Iteration
Iteration
experimental
control
Service Innovation Process through Experimenta- tion
Source: Thomke, 2003