New Service Development: Initiation Strategies

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New Service Development Initiation Strategies

• Authors David Kelly
• Chris Storey
• Presenter Jared Weber

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Whats the Purpose?

• There is plenty of information on NPD (New
  Product Development) there is really nothing on
  the NSD ( New Service Development).
• Investigate how, and what extent, service firms
  plan their search for new services.
• Address the general approach service firms have
  for NSD
• The strategies used in choosing potential new
  service projects.

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Previous Work?

• None! No detail of previous studies.
• There is plenty of work on the NPD but none on
  the NSD
• Businesses are just now starting to realize the
  importance of NSD

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Idea Generation

• Evolves inside and outside the firm, formal and
  informal search procedures (Cowell,1988)
• Coming up with Ideas is relatively easy,
  businesses tend not to engage in formal idea
  generation (Easingwood, 1986)

• Whether new product strategy actually constrains
  the search for new ideas? (Moore,1987)
• Techniques for stimulating ideas must be created
  and maintained on an ongoing basis to keep
  generating innovations (Crawford, 1994)

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Idea generation cont.

• The techniques should be embraced by the whole
  firm (Vandermerwe, 1987)
• Front-line personnel did not appear to play a
  significant role in the early stages of NSD
  (Brentani,1991)
• Increased work load (Easingwood, 1986)

• Competitors have been identified as a more
  important source of ideas than customers.
  (Easingwood, 1996)
• 80 of banks view their competitors as main
  source of new product ideas (Teixeria and
  Ziskin,1993)

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Screening

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

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

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Aim of the research

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

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Research Method

• Questionnaire given to Leading UK service firms
  in five different sectors. (Banking,
  Telecommunications, Insurance, Transportation and
  Media)
• Sent to marketing personnel
• Followed by interviews.

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Research Cont.

• 43 executives respond from a sample of 154.
• Response rate of 28
• 57 marketing/product development directors
• 21 marketing or product managers
• 21 general management positions

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Questionnaire

• New products were defined as
• Core products that are new-to-the-world or new to
  the company.
• Core products that are improvements over existing
  products.
• Supplementary and value-added services.

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Results

• Respondents asked to categorize themselves
  according to the Miles and Snow (1978) approaches
  to innovation
• (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.

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Key Barriers to Effective Service Development in
a Firm
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Idea Generation Starting Point

• 3 new questions
• Whether new product ideas were generated
  continuously or just needed
• Whether the firm has a formal idea search
  methodology
• Whether the idea search methodology is documented

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Open Question

• Criteria used to evaluate new product ideas?
• 74 different criteria
• Categorized into five common themes.

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Findings

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

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

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Findings

• Found idea screening to be carried out more
  systematically than idea generation and basing
  their decision to proceed on financial criteria.
• Lack of resources is a common barrier to NSD.
  Result in spreading resources too thin.
• Need to pick projects that can be effectively
  carry out with the resources available.

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Further Research

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

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Conclusion

• NSD is an informal processes compared to NPD.
• Firms are missing out of opportunities
• Few firms systematically involve contact or
  operations staff in the process (Goes against
  services marketing theory)

• Screening process needs to be improved to pick
  winners and prioritize projects.
• Service firms are not satisfied with their
  ability to develop new services.