Perhaps the single most important aspect of service development, one that is absolutely imperative for success, is a staged development process that hinges on the involvement of customers, employees, and key constituents.
A staged development process is one that manages new service ideas as they move through various phases of development—all the way to launch. While the overall strategy for new service development should closely mirror that used for developing new products, service development requires a unique hands-on approach due to the complex, varied nature of service delivery.
After a foundation is set that links the overall corporate strategy to the creation of new services, the development process differentiates itself from that used in new product development in both subtle and dramatic ways.
3.3.1 A Corporate Innovation Strategy While many executives would view cre- ating a new services strategy as a no- brainer, it is surprising how many fail to perform this step properly. Just as the foundation of a structure lays the base upon which to build, a new ser-
vices strategy lays the platform upon which to create new services. If you don ’t know what strategic roles you want new services to play within your organization, this will lead to haphazard and disjointed service creation, and it will be diffi cult to evaluate their success.
An effective new services strategy should have four main elements:
1. The new service vision and the strategic roles that new services must play 2. The fi nancial growth gap that new services are expected to fi ll over the
next fi ve years
3. Screening criteria to be used for moving ideas and concepts through the development process
4. A resource strategy that outlines the fi nancial and human resource requirements for successful new service creation
Without a well-articulated strategy, companies often fi nd themselves working on the wrong projects. It is also not uncommon for companies to fall into the trap of supporting too many or too few projects. This results in under- or overutilized innovation resources, which can lead to reduced morale among service providers and thus lower overall service quality. It cannot be stressed enough how important employee morale and motiva- tion are in the creation of new services. Without the enthusiastic support of employees, often the very people who deliver the service to customers, new services are doomed to failure.
The fi nancial growth gap helps determine the magnitude of the new service efforts that a company will attempt to fulfi ll. A large gap usually dictates breakthrough new services both inside and outside their current market or category. This point of reference prepares companies for the degree of risk they will need to undertake.
Establishing a set revenue target for new service projects from the very beginning also helps to ensure that the right projects are being pursued. Comparing variables such as category and market size, market share, recent new service successes, and available resources helps a com- pany select the appropriate projects scope and reduce risk and employee
A new services strategy lays the strategic platform upon which to create new services.
frustration in trying to meet unrealistic expectations. Similarly, the new service vision and strategic roles provide guidelines to help guide the selec- tion of ideas as they move through the process.
The screening criteria help separate the winners from the losers, prioritize concepts, and assure continued overall alignment of the desired portfolio. The criteria provide metrics across a variety of categories to help companies understand the relative attractiveness of each new service.
3.3.2 Service Development and Shaping: The Voice of the Customer The fi rst stage of new service develop-
ment is problem identification and exploration. It is here that acutely felt problems, frustrations, needs, and wants of customers and noncustomers are uncovered. The point is not to ask customers directly what they need or want, but to uncover this information
by understanding customers ’ behaviors, habits, preferences, and lifestyles.
By utilizing a range of qualitative research techniques, companies can zero in on and identify customers ’ biggest problems and frustrations, which often serve as the foundation upon which new solutions can be gen- erated. This “needs and wants” focus can be broad (e.g., category service usage processes or routines) or narrow (e.g., service features, benefi ts, or dissatisfactions). The problem identifi cation stage is the most defi ning stage of service development, as it identifi es the most intensely felt cus- tomer-based problems and opportunities.
The second stage of service development is targeted new service ide- ation and conceptualization. The fi rst objective is to generate dozens of new solution ideas that address the needs, wants, problems, and frustrations uncovered in problem identifi cation. Participants in the ideation process should include customers and noncustomers as well as a cross-functional mix of employees. After ideas have been condensed and shaped, the screen- ing criteria are used to determine which ideas should move on to con- ceptualization. Once this screening has taken place, the highest-potential concepts are then turned into concept statements, shaped and tested with customers, and evaluated fi nancially through rigorous business analyses.
Solvent Systems International, Inc., helps customers such as auto body shops and dry cleaners reduce chemical waste. It ’s not part of an industry normally known for service innovation, but founder Steve Rundell has
Identifying customers’ biggest problems, frustrations, needs, and wants upfront is argu- ably the most important stage of new service development.
developed winning solutions by listening to customers. Solvent Systems found that federal regulations charged companies for chemical waste they shipped offsite, even if it was sent to a distilling plant. To solve this prob- lem, Solvent Systems uses trucks that go to clients ’ locations and distill their chemicals onsite. The service can typically reduce waste by up to 80 percent. It has been a great success and the company has expanded into new areas, including a used-cooking-oil collection service that turns the cooking-oil waste into biodegradable industrial cleaning products.
These services provide win-win solutions for everybody by reducing cus- tomers ’ expenses as well as the environmental impact of their waste.
3.3.3 Employee Involvement and Service Blueprinting Because so much of a service ’s success
or failure will hinge on its successful delivery, it is absolutely essential to involve the delivery staff in the early problem identification and ideation sessions. These staff members have been “in the trenches,” dealing with
customer feedback and complaints, giving them excellent frames of refer- ence for identifying unmet needs and frustrations. Staff members can be a great source for hypotheses regarding customers ’ problems and needs, and for identifying areas of frequent or intense customer dissatisfaction with current solutions. Additionally, the delivery staff are the people who will ultimately transform a service concept into a well-defi ned customer-valued offering. Involving them from the beginning will improve launch effective- ness, thereby improving delivery.
In addition to involving the delivery staff directly throughout the devel- opment process, another effective way of engaging them is by having them create service blueprints that map interactions, contact points, and routes of delivery for service ideas. For all services that have moved through to con- ceptualization, a service processes map—a graphical representation of the delivery process, including all possible contact points—should be created.
It should map out the sequential fl ow of activities and interactions, those both visible and invisible to the customer. The initial draft should map out different possibilities for points of contact and service delivery. These dif- ferent alternatives can then be tested once a prototype is ready. In addition, this will allow staff to better visualize their role in the overall service delivery process, making them feel like a valued, essential part of a larger team.
Staff members can provide valuable frames of reference for identifying unmet cus- tomer needs and frustrations.
Let ’s look at the touch points involved in a newspaper experience for a customer. The billing process, ease of holding delivery during vaca- tion, quality of the editorials, delivery of the newspaper to the doorstep, digital access, appeal of separate sections of the newspaper, and the like represent pieces of the total experience pie. While the text (in physical or digital form) is the core offering, all of the services that surround it are indeed inseparable and help to shape the collective experience. A service blueprint will help the newspaper company both identify all these different touch points and map out possible modes and styles of interac- tion in every key customer involvement situation. This map will help show the linkages among the different service and product attributes and help give employees a sense of their purpose in the overall value proposition the company is offering.
3.3.4 Prototype and Beyond: Differentiation through Delivery The next major stage is prototype
development and launch. In this stage, concepts that pass through screens are then turned into full-scale prototypes, and detailed market test and launch
plans and service delivery plans are developed. The highest potential ser- vice concepts are then brought to life and refi ned and tested with custom- ers. After being tested, tweaked, and validated by customers, the services are ready for launch in accordance with a specifi ed roll-out plan. This plan must take into account a number of factors, including screening criteria, the new services strategy, and prototype testing results.
Prototype testing is one of the most essential elements of new service development. Unfortunately, many service companies omit the proto- type testing and jump directly from concept to launch. This could not be more deleterious to successful service creation. Because services generally cannot be patented, are extremely susceptible to replication, and require few barriers to entry, it is imperative to garner customer feedback on a new service in order to improve and tweak it before a full-scale launch. Failure to do so can result in unsatisfi ed customers and leave an organization vul- nerable to competition. This is devastating because of the fi nancial rami- fi cations of lost investment but is also damaging to the creative mindset and the chances of future risk taking and success.
The launch is another unique aspect of service creation because it is essentially a never-ending step. When a product is launched, a company ’s
The launch of a new service is essentially never-ending.
hard work is essentially over; it is exactly the opposite with services.
A service needs constant monitoring and assessment to make sure that it is still addressing relevant customer needs in the most effi cient and effec- tive way possible. There is always room for improvement with service, so constant customer feedback is essential.
In addition, it is more diffi cult to predict the reception a new service will get compared to a new product. Although it is possible to test a service much like a product (through qualitative and quantitative research with a representative sample of customers), often the service ’s value proposi- tion is highly infl uenced by external circumstances. While many of these factors may be unforeseeable prior to launch, it is possible to mitigate the consequences of this lack of information by testing plausible market occur- rences in prototype testing. Developers should start by identifying key vari- ables that can impact the service experience. For example, the value of a service can be directly related to the number of people who will use it.
The service can then be tested at different usage levels with customers in order to determine its effect on the service ’s overall value.
The possible impact of external circumstances, either positive or negative, also calls for constant customer feedback and monitoring after launch. Only with continuous understanding of the changing value propo- sitions of the services provided can a company effectively reevaluate the service offered.
Today, intangible assets can represent over 80 percent of a company ’s value. But proper valuation of these assets is often not as easy as valuation of tangible ones. To meet this challenge, Ocean Tomo created a market- based system to value intellectual property—a live auction. This innovative platform gave customers an easy way to buy and sell intellectual property as simply as tangible goods. The results are signifi cant; for example, a pat- ent portfolio that had attracted bids of less than $1 million through the tedious process of identifying buyers, calling them, doing due diligence, and trying to convince them to buy garnered more than $15 million in winning bids though an auction.
The entire service has been designed for simplicity: Ocean Tomo pub- lishes a catalog with detailed information about the intellectual property, sets a date for the auction, and tells people to show up if they want to buy.
The service has been extremely successful and has led to a number of other fi rsts for the company, which has created the fi rst equity index and the fi rst exchange-traded fund.
Ocean Tomo is continuing to develop this innovation. The next step is creating a market for the charitable contribution of technology—Invent
for Humanity Technology Transfer Exchange Fair. Currently, even if a company is willing to give away technology to those who need it—like the Red Cross—there ’s no method for the transfer. To address this need, Ocean Tomo is creating a humanitarian market that will facilitate a com- mercial exchange through an auction market.
3.3.5 Training as Part of the New Service Development Process
Services, unlike products, are ultimately delivered either by people or with the assistance of people. Because all people are unique and respond dif- ferently in given situations, certain measures must be taken to ensure that employees have the resources and knowledge to act in the best interest of the company. Training of employees should revolve around three main areas:
1. The company ’s corporate strategy and the service ’s strategic role 2. Crisis management and troubleshooting
3. The actual delivery of the service
First, only with strong knowledge of the strategic role or objective of the service under the larger umbrella of corporate strategy can employees make decisions that will tie into the overall company objectives. Training them to see the larger picture will help ensure that they have the com- pany goals in mind in every decision made. Second, employees need to be trained in extensive crisis management and troubleshooting situations.
Only when they are well versed in the plausible mishaps will they be able to respond in a consistent and appropriate manner. It is imperative to invest in extensive training for the basic delivery of the service. Learning by doing is not an acceptable approach in service development, as this will lead to alienated customers and lost business.