New Service Development: New Service Development: Initiation StrategiesInitiation Strategies

Authors: David Kelly Authors: David Kelly

Chris StoreyChris Storey

Presenter: Jared WeberPresenter: Jared Weber

What’s the Purpose?What’s the Purpose?

There is plenty of information on NPD (New There is plenty of information on NPD (New Product Development) there is really nothing on Product Development) there is really nothing on the NSD ( New Service Development).the NSD ( New Service Development).

Investigate how, and what extent, service firms Investigate how, and what extent, service firms plan their search for new services.plan their search for new services.

Address the general approach service firms Address the general approach service firms have for NSDhave for NSD

The strategies used in choosing potential new The strategies used in choosing potential new service projects.service projects.

Previous Work?Previous Work?

None! No detail of previous studies.None! No detail of previous studies.

There is plenty of work on the NPD but There is plenty of work on the NPD but none on the NSDnone on the NSD

Businesses are just now starting to realize Businesses are just now starting to realize the importance of NSDthe importance of NSD

Idea GenerationIdea Generation

Evolves inside and Evolves inside and outside the firm, formal outside the firm, formal and informal search and informal search procedures (Cowell,1988)procedures (Cowell,1988)

Coming up with Ideas is Coming up with Ideas is relatively easy, relatively easy, businesses tend not to businesses tend not to engage in formal idea engage in formal idea generation (Easingwood, generation (Easingwood, 1986)1986)

Whether new product Whether new product strategy actually strategy actually constrains the search for constrains the search for new ideas? (Moore,1987)new ideas? (Moore,1987)

Techniques for Techniques for stimulating ideas must be stimulating ideas must be created and maintained created and maintained on an ongoing basis to on an ongoing basis to keep generating keep generating innovations (Crawford, innovations (Crawford, 1994) 1994)

Idea generation cont.Idea generation cont.

The techniques should be The techniques should be embraced by the whole embraced by the whole firm (Vandermerwe, firm (Vandermerwe, 1987)1987)

Front-line personnel did Front-line personnel did not appear to play a not appear to play a significant role in the significant role in the early stages of NSD early stages of NSD (Brentani,1991)(Brentani,1991)

Increased work load Increased work load (Easingwood, 1986)(Easingwood, 1986)

Competitors have been Competitors have been identified as a more identified as a more important source of ideas important source of ideas than customers. than customers. (Easingwood, 1996)(Easingwood, 1996)

80% of banks view their 80% of banks view their competitors as main competitors as main source of new product source of new product ideas (Teixeria and ideas (Teixeria and Ziskin,1993)Ziskin,1993)

ScreeningScreening

Allocate resources Allocate resources between projects which between projects which most likely would help the most likely would help the firm meet its objectives?firm meet its objectives?Can be a single activity or Can be a single activity or multi-stage, can be multi-stage, can be quantitative or qualitative.quantitative or qualitative.Done at the early stages Done at the early stages of NSD, therefore a of NSD, therefore a shortage of hard facts.shortage of hard facts.

Should be refined to Should be refined to reflect the firm (Choffray reflect the firm (Choffray and Lillien, 1980)and Lillien, 1980)Decisions will always be Decisions will always be plagued by a high degree plagued by a high degree of uncertainty and of uncertainty and subjectivity. subjectivity. (Cooper,1981)(Cooper,1981)Hidden cost to failure; Hidden cost to failure; managerial effort wasted, managerial effort wasted, corporate image, missed corporate image, missed opportunities for new opportunities for new products.products.

Aim of the researchAim of the research

Investigate whether service firms use Investigate whether service firms use systematic procedures to generate and systematic procedures to generate and screen ideas for new services.screen ideas for new services.

Research MethodResearch Method

Questionnaire given to Leading UK service Questionnaire given to Leading UK service firms in five different sectors. (Banking, firms in five different sectors. (Banking, Telecommunications, Insurance, Telecommunications, Insurance, Transportation and Media)Transportation and Media)

Sent to marketing personnel Sent to marketing personnel

Followed by interviews.Followed by interviews.

Research Cont.Research Cont.

43 executives respond from a sample of 43 executives respond from a sample of 154.154.

Response rate of 28%Response rate of 28%

57% marketing/product development 57% marketing/product development directorsdirectors

21% marketing or product managers21% marketing or product managers

21% general management positions21% general management positions

QuestionnaireQuestionnaire

New products were defined as:New products were defined as:1.1. Core products that are new-to-the-world or Core products that are new-to-the-world or

new to the company.new to the company.

2.2. Core products that are improvements over Core products that are improvements over existing products.existing products.

3.3. Supplementary and value-added services.Supplementary and value-added services.

ResultsResults

Respondents asked to categorize themselves Respondents asked to categorize themselves according to the Miles and Snow (1978) approaches to according to the Miles and Snow (1978) approaches to innovationinnovation(1) Prospector. Values being "first" with new products, markets and technologies.(2) Analyzer. Seldom first to market, but frequently a fast follower with a more cost-efficient or innovative product(3) Defender. Locates and maintains a secure niche by protecting their position in a relatively stable product or service area.(4) Reactor. Responds to product and market changes only when forced by environmental pressures.

Key Barriers to Effective Service Key Barriers to Effective Service Development in a FirmDevelopment in a Firm

Idea Generation Starting PointIdea Generation Starting Point

3 new questions3 new questions1.1. Whether new product ideas were generated Whether new product ideas were generated

continuously or just neededcontinuously or just needed

2.2. Whether the firm has a formal idea search Whether the firm has a formal idea search methodologymethodology

3.3. Whether the idea search methodology is Whether the idea search methodology is documenteddocumented

Open QuestionOpen Question

Criteria used to evaluate new product Criteria used to evaluate new product ideas?ideas?

74 different criteria74 different criteria

Categorized into five common themes.Categorized into five common themes.

FindingsFindings

NSD is risky yet the NSD is risky yet the revenue is good for those revenue is good for those who use it.who use it.Firms will find it difficult to Firms will find it difficult to generate new project generate new project proposals to remain proposals to remain competitive if NSD is not competitive if NSD is not implementedimplementedNeed for the development Need for the development of systems and of systems and processes that stimulate processes that stimulate idea generation in a firmidea generation in a firm

Main barrier to innovation Main barrier to innovation in service firms is the lack in service firms is the lack of expertise within the of expertise within the firm.firm.Marketing Department is Marketing Department is the source for large the source for large percentage of new percentage of new service ideasservice ideasOperations and Customer Operations and Customer Service personnel are not Service personnel are not actively involved as they actively involved as they should be.should be.

FindingsFindings

Found idea screening to be carried out more Found idea screening to be carried out more systematically than idea generation and basing systematically than idea generation and basing their decision to proceed on financial criteria.their decision to proceed on financial criteria.

Lack of resources is a common barrier to NSD. Lack of resources is a common barrier to NSD. Result in spreading resources too thin. Result in spreading resources too thin.

Need to pick projects that can be effectively Need to pick projects that can be effectively carry out with the resources available.carry out with the resources available.

Further ResearchFurther Research

Identify the relevance of different NSD Identify the relevance of different NSD process models for different types of process models for different types of services and in different industrial settings.services and in different industrial settings.

ConclusionConclusion

NSD is an informal NSD is an informal processes compared to processes compared to NPD.NPD.

Firms are missing out of Firms are missing out of opportunitiesopportunities

Few firms systematically Few firms systematically involve contact or involve contact or operations staff in the operations staff in the process (Goes against process (Goes against services marketing services marketing theory)theory)

Screening process Screening process needs to be improved needs to be improved to pick winners and to pick winners and prioritize projects.prioritize projects.

Service firms are not Service firms are not satisfied with their satisfied with their ability to develop new ability to develop new services.services.