McCombs School Of Business

The University of Texas at Austin

NEW SERVICE DEVELOPMENT

MAN 386.16 and MKT 382

Fall 2001

 

Professor James A. Fitzsimmons Classroom: CBA 4.340

CBA 3.238, 471-9453 (voice) Meeting: Tuesday 2-5

Office Hours: By Appointment Unique No.: 03380/04560

E-mail: jfitz@mail.utexas.edu URL: www.bus.utexas.edu/~fitzj

 

COURSE PERSPECTIVE

 

Services are in the process of witnessing a transformation from the traditional concept of a service transaction to one of an experience. Consider how Starbuck’s Espresso Bar, Disney World, and Planet Hollywood have defined their respective services as an experience. Experiences create added value by engaging and connecting with the customer in a personal and memorable way. Business students are uniquely qualified to take the lead in establishing these new experience based services. The table below illustrates the features that distinguishes an experience from a good or a service:

 

Goods Services Experiences

Tangible Intangible Memorable

Inventoried Delivered on Demand Unfold Over Time

Standardized Customized Inherently Personal

 

This is a project course for students interested in exploring innovative approaches to the development of new services (e.g. entrepreneurial services, extensions to existing services, services based on new technology, Internet services, and non-profit services). The course will address topics such as: process of service innovation, technology driven services, services derived from products, service prototyping, location and site planning, design of front and back office operations, service fail-safeing and recovery planning, creation of a service climate and culture, electronic delivery of service, service branding, recruitment and training for the service encounter, customer selection, managing customer expectations and creating a sustained competitive advantage.

 

The seminar will examine recent literature on topics related to new service development, study cases that are available, but most importantly each team of two or three students will be assisted in their development of a new service concept.


 

TEACHING/LEARNING METHODOLOGY

 

The first part of the course will consist of an overview of service organizations from the perspective of “The Service Profit Chain” model. The assigned readings, class discussion, and case illustrations will ensure that all seminar participates have grounding in the fundamentals of service management issues. The second part of the course will be focused on the development of an in-depth understanding of the new service development process and related service design topics and analytical tools. The third part of the course explores new service business models in the age of the Internet. During the fourth part of the course, individual students (or teams if desired) will finalize the development of a new service of their choice as we explore new service design issues. The course concludes with student project presentations and a written new service proposal.

 

CASE METHOD

 

The case method is used throughout the course. Study questions on each assigned case are listed immediately following a brief description of the case in the Detailed Course Outline. These questions should serve as a starting point with additional insights being welcomed. All class members are expected to have read the case and reflected upon the assigned questions. Furthermore, class members are encouraged to apply concepts from the assigned readings to their analysis of the case.

 

Active participation is expected throughout the entire class with thoughtful contributions that advance the quality of the discussion. Please note that the frequency (i.e., the quantity) of your interventions in class is not a key criterion for effective class participation. The classroom should be considered a laboratory in which you can test your ability to convince your peers of the correctness of your ap­proach to complex problems and of your ability to achieve the desired results through the use of that approach.

 

CASE WRITE-UP

 

By the end of the first session each student will need to select two cases for written analysis during the course. Please provide me with a priority list of six cases to allow me to select a case to insure that at least one student has written the case under discussion. The analysis will address the case questions and be limited to five pages, printed double-spaced, plus exhibits. The assigned questions for a case are shown in the detailed course outline following the case description. At a minimum these questions must be addressed in the written analysis with creative thinking beyond these issues being rewarded. Written papers are due at the start of class. I will evaluate your written case analysis using the attached grading sheet.

 

(1) Papers should be printed, double-spaced, with normal margins. The name of the case should be on the first page of the text with your names, date, and course number. An executive summary is not required nor expected.

 

(2) The page limit for each paper is five pages of text, plus exhibits. Note that these are maxi­mum limits. Papers should be concise and coherent.

 

(3) Exhibits should contain specific types of analyses (application of a framework, table of comparisons, cost analysis, competitive features, etc.) and information (web page of firm) that supports and is relevant, but would be too detailed for the body of the paper.

 

(4) Please proofread/spellcheck your paper before turning it in. Papers for this course should be of the same quality that you would provide to the management of the business.

 

FACILITATING CASE DISCUSSION

 

By the end of the first session your team (two students) will need to select one case for your team to lead the class in its analysis. Facilitating a case discussion is not presenting a complete analysis of the case but rather leading the class in the case analysis. This requires the team to stimulate interest and draw out insights and ideas from the class creating active participation of class members who are expected to have read the case and thought about the assigned questions. Often the case discussion begins with a brief overview of the firm. Discussions of the assigned questions are facilitated using an outline or bullet form with inputs provided by the students. As a group we will try to build a complete analysis of the situation and address the problems arising in the case applying the framework presented in the readings for the session. At the conclusion of the case discussion, the instructor will summarize the take-aways for the session.

 

Criteria for measuring the effectiveness of leading a case discussion include:

 

a) Ability to stimulate interest among your classmates.

b) Ability to relate the concepts from the readings to the issues in the specific situation.

c) How well the discussion generated insights and ideas from the participants.

d) How effectively the team led the discussion.

e) Was the analysis complete?

 

NEW SERVICE DEVELOPMENT PROJECT

 

Each team (two students) will use this seminar as an opportunity to develop a new service offering. The project will be written up as a final report in such detail that it could be used as a prospectus for seeking financing from a venture capitalist. A presentation of the service concept will be made before the class to solicit critical feedback on its value as a sustainable service concept. The project report at a minimum should include a description of the service concept, market analysis of current competition, potential customer market, detailed design of the service delivery process, technology investment, staffing needs and skills, and pro forma financial projections.

 


CLASS PARTICIPATION

 

Your participation in class discussions is an essential element of a seminar class, because often the most interesting issues come up during class discussions. Contributions to class discussion are based on reflective thinking on the reading assignment and/or analysis of an assigned case. I expect that you will read the assigned materials in advance and be prepared to offer your perspective on the topic.

 

PERFORMANCE EVALUATION

 

Case Write-up: (2) & 15% 30%

Class Participation 15%

Facilitation of Case Discussion (Team) 15%

Written New Service Proposal (Team) 40%

 

Course MATERIALs

 


 

GRADING SHEET FOR WRITTEN PAPERS

 

Analysis

Poor Excellent

1. Is the analysis complete and comprehensive? |____|____|____|____|

 

2. Does the analysis apply concepts from the readings? |____|____|____|____|

 

3. Does the analysis show the relationships among important

factors in the situation? |____|____|____|____|

 

4. Are assumptions made in the analysis stated explicitly? |____|____|____|____|

 

5. Does the analysis isolate the fundamental causes of problems? |____|____|____|____|

 

Recommended Action

 

1. Are the criteria for selecting recommendations stated? |____|____|____|____|

 

2. Is the plan of action integrated in a logical way and linked

to the analysis? |____|____|____|____|

 

Exhibits

 

1. Are analyses in the exhibits done correctly? |____|____|____|____|

 

2. Do the key exhibits support and add to the text on key points? |____|____|____|____|

 

Overall Criteria

 

1. Is the paper logically consistent and effectively structured so

it sells its recommendations? |____|____|____|____|

 

2. Is there a high likelihood that the recommendations will

achieve their intended results? |____|____|____|____|


GRADING SHEET FOR FACILITATING CASE DISCUSSION

 

Analysis

Poor Excellent

1. Was the analysis of the case complete? |____|____|____|____|

 

2. Does the analysis apply concepts from the readings? |____|____|____|____|

 

3. Does the analysis show the relationships among important

factors in the situation? |____|____|____|____|

 

Case Discussion

 

1. Did the discussion stimulate interest among class participants? |____|____|____|____|

 

2. Did the team use effective questions to lead the discussion? |____|____|____|____|

 

3. How well was the timing and pace of the case discussion? |____|____|____|____|

 

4. Was the PowerPoint presentation useful and well prepared? |____|____|____|____|

 

Overall Criteria

 

1. How well organized was the discussion? |____|____|____|____|

 

2. How well did the discussion draw out insights and ideas from

the students? |____|____|____|____|

 

 


DETAILED COURSE OUTLINE

 

MODULE 1: THE SERVICE PROFIT CHAIN

 

Session #1 (September 4)

 

THE SERVICE PROFIT CHAIN

 

Packet Readings: "Welcome to the Experience Economy”, Joseph Pine and James Gilmore, Harvard Business Review, July-August 1998, 97-105. (98407)

 

Free Press Book: Ch. 1, Setting the Record Straight

Ch. 2, Capitalizing on the Service Profit Chain

Ch. 3, Managing by the Customer Value Equation

 

Discussion Questions:

 

 

Session #2 (September 11)

 

BUILDING PROFIT CHAIN CAPABILITY

 

Free Press Book: Ch. 6, Managing the Customer-Employee “Satisfaction Mirror”

Ch. 7, Building a Cycle of Capability

 

Discussion Questions:

 

 

Case: Enterprise Rent-A-Car

 

Enterprise is a replacement car rental service that does not compete directly with the national car rental agencies that use airport locations.

 

Assignment Questions:

 

 

SERVICE PROFIT CHAIN IN ACTION

 

Free Press Book: Ch. 12, Reengineering the Service Organization for Capability

 

Case: Taco Bell-1994 9-694-076

 

Taco Bell CEO, John Martin, embraces a philosophy of continual change to achieve a goal of 200,00 points of access by the year 2000. The implications for Taco Bell are dramatic changes in organizational structure, culture, human resources, technology, and communications. In redefining its market and “thinking outside the box” in all aspects of its business, Taco Bell hopes to become a “super brand” transcending not only categories but industries as well.

 

Assignment Questions:

 

 

Session #3 (September 18)

 

DESIGNING SERVICE DELIVERY SYSTEMS

 

Free Press Book: Ch. 8, Developing Processes That Deliver Value

Ch. 9, Designing Service Delivery Systems for Quality, Productivity, Value

Ch. 11, Measuring for Effective Management

 

Discussion Questions:

 

 

BENCHMARK SERVICE DESIGN

 

Free Press Book: Ch. 13, Leading and Living Service Profit Chain Management

 

Case: Southwest Airlines-1993 (A) 9-694-023

 

Southwest Airlines, the only major U.S. airline to be profitable in 1992, makes a decision as to which of two new cities to open, or to add a new long-haul route. This case provides a window into Southwest’s strategy, operations, marketing, and culture. Lessons can be learned how an airline can simultaneously be a low-cost leader, service leader, and profit leader.

 


Assignment Questions:

 

 

 

MODULE 2: NEW SERVICE DEVELOPMENT PROCESS

 

Session #4 (September 25)

 

NEW SERVICE INNOVATION

 

Sage Book: Ch. 1, Critical Evaluation of the New Service Development Process: Integrating Service Innovation and Service Process Design

 

Discussion Questions:

 

Case: Alaska Airlines 9-800-004

 

Alaska Airlines, serving west coast cities from Prudhoe Bay, Alaska to Puerto Vallarta, Mexico, has won awards for providing outstanding customer service. Faced with price competition from Southwest Airlines, Alaska is introducing frontline technology and customer self-service options to improve productivity and reduce costs.

 

Assignment Questions:

 

 


ANTICIPATING SERVICE NEEDS

 

Packet Readings: "The Four Faces of Mass Customization," James Gilmore and Joseph Pine, Harvard Business Review, January-February 1997, 91-101. (97103)

 

“Discovering New Points of Differentiation,” Ian MacMillian and Gunther NcGrath, Harvard Business Review, July-August 1997, 133-145. (97408)

Discussion Questions:

 

 

Session #5 (October 2)

 

CREATING A STRATEGIC SERVICE VISION

 

Case: Willow Creek Community Church 9-691-102

 

Case describes the historic evolution and current positioning of a Christian church that focuses on the attraction of “unchurched” individuals. Describes the church’s strategic service vision and its current growth and leadership problems.

Assignment Questions:

 

 


NEW SERVICE DEVELOPMENT

 

Sage Book: Ch. 2, The Contextual and Dialectical Nature of Experiences

Ch. 3, The Real Time Service Product: Conquering Customer Time & Space

Discussion Questions:

 

 

Session #6 (October 9)

 

USING CONJOINT ANALYSIS IN SERVICE DESIGN

 

Packet Readings: Courtyard by Marriott: Designing a Hotel Facility with Consumer-Based Marketing Models”, Jerry Wind, Paul Green, Douglas Shifflet, Marsha Scarbrough, Interfaces, vol. 19, no. 1, January-February 1989, 25-47.

 

Sage Book: Ch. 6, Service Capacity Design with an Integrated Market Utility-based Method

 

Discussion Questions:

 

 

Case: Sunday River Ski Resort 9-692-025

 

Sunday River is a New England ski resort located in Maine. In the face of a general plateau in the market for skiing, Sunday River has a goal of increasing skier visits to their resort.


Assignment Questions:

 

 

Session #7 (October 16)

 

CREATING A SERVICE CULTURE

 

Case: Hal Rosenbluth (A) 9-996-043

 

With new proprietary information system Hal is repositioning his travel agency for rapid growth. However, the new system will require front-line agents to show greater initiative and creativity then exhibited in the past. Hal needs to find a way to communicate the new values and emphasize the worth of individual initiative within his geographically dispersed organization.

 

Assignment Questions:

 

 

 

KNOWLEDGE INTENSIVE SERVICES

 

Sage Book: Ch. 7, Process Innovation in Information-Intensive Services

 

Case: Hal Rosenbluth (B) 9-996-044

 

Assignment Questions:

 

MODULE 3: S ERVICE AND THE INTERNET

 

Session #8 (October 23)

 

COMBINING CLICK WITH MORTAR

 

Case: Rosenbluth International and Biztravel.com 800-356

 

Acquiring an Internet travel agency targeting business travelers results in unanticipated need for human-to-customer service beyond the occasional "by exception" (due to technology intermediation). This case illustrated how a brick and mortar firm can help a dot.com and vice versa.

Assignment Questions:

 

DELIVERY OF ELECTRONIC SERVICES

 

Packet Reading: "Strategy and the New Economics of Information," Philip Evans and Thomas Wurster, Harvard Business Review, September-October 1997, 71-82 (97504)

 

Sage Book: Ch. 8, Design and Delivery of Electronic Services: Implications for Consumer Value in Electronic Food Retailing

 

Case: Amazon.com: Winning the Online Book Wars

 

Amazon.com has created a huge splash in today's financial markets. Ever since it went public, Amazon.com has been subjected to intense scrutiny, debate, and public attention. Before addressing the questions, you may wish to visit the web site to better understand its business design.

 


Assignment Questions:

 

Session #9 (October 30)

 

INTERNET RETAILING

 

Packet Reading: "Making Business Sense of the Internet," Shikhar Ghosh, Harvard Business Review, March-April 1998, 126-135 (98205)

 

"Note on Marketing and the World Wide Web" 9-597-037

 

Case: E-Business Innovation at Golfsmith

 

Golfsmith was initially established as a catalog distributor of golf components (shafts, grips, and heads) for sale to custom golf club-fitters and individuals. Subsequently, a retail store was opened in Austin, Texas for sale of name brand golf equipment. Golfsmith is considering who to use the Internet to improve customer satisfaction and establish another distribution channel.

 

Assignment Questions:

 

 


CUSTOMER SUPPORT AND LOGISTICS IN E-COMMERCE

 

Packet Readings: "Service in E-Commerce: Findings from Exploratory Research" N9-800-418

 

Case: Service and Value in e-Commerce N9-800-384

 

The 1999 holiday season presented an opportunity for e-commerce firms to demonstrate their ability to deliver value (quality relative to price). This case is a collection of excerpts form newspapers and magazines that focus on service failures and the source of value in e-commerce.

 

Assignment Questions:

 

 

Session #10 (November 6)

 

STAGING THE INTERNET CUSTOMER EXPERIENCE

 

Sage Book: Ch. 4, Exploiting the Service Concept for Service Design and Development

 

Case: Sothebys.com N9-800-387

 

This case describes the traditional "live" auction process used by Sotheby's and the online version of the same process. The role of Associates (dealers, approved by Sotheby's specialists) in leveraging a business is explored along with the fact that some costs may rise when a company takes its business to the Internet.

 

Assignment Questions:

 

 


PROVIDING INFORMATION VIA THE INTERNET

 

Case: Four Seasons Hotels and Resorts N9-800-385

 

The Four Seasons has traditionally avoided technology that would decrease its guests' perception of intimate service. Nonetheless, it has a sophisticated web site that provides more detailed information on its properties than the web sites of other major hotel chains.

 

Assignment Questions:

 

 

 

MODULE 4: ISSUES IN NEW S ERVICE DESIGN

 

Session # 11 (November 13)

 

SERVICE GUARANTEE

 

Free Press Book: Ch. 10, Attaining Total Customer Satisfaction

 

Sage Book: Ch. 12, The Impact of Service Guarantees on Service Quality at Radisson Hotels Worldwide

 

Case: Westlake Cinemas: Designing a Service Guarantee 9-689-004

 

The CEO of a small chain of movie theaters is grappling with the design of a service guarantee. She is faced with the following issues: assessing customer needs, defining the service offering, determining current organizational capabilities, and determining the role that a guarantee would play in competitive strategy.

 

Assignment Questions:

 

 


CUSTOMER SELECTION AND RETENTION

 

Free Press Book: Ch. 4, Rethinking Marketing: Building Customer Loyalty

Ch. 5, Attaining Total Customer Satisfaction

 

Sage Book: Ch. 14, Models for Customer Selection

 

Case: Air Miles Canada 9-694-008

 

Loyalty Management Group was conceived as a shopping loyalty business for it's sponsoring organizations. Customers could join for free and receive air miles redeemable on major airlines based on regular everyday purchases from the sponsors. However, sponsors gained more than customer loyalty but also valuable information about their customers.

 

Assignment Questions:

 

1. How does a sponsor benefit from participation in Air Miles? What is the value of one Air Mile to Safeway?

 

Session # 12 (November 20)

 

SIMULATION MODELING OF SERVICE SYSTEMS

 

Packet Readings: "Simulation Introduction Module," PROMODEL Corporation

 

Case: Renaissance Clinic

 

Assignment:Meet in the 5 th floor computer lab, CBA 5.325 - MOD East

 


Session # 13 (November 27)

 

SERVICE RECOVERY PLANNING

 

Sage Book: Ch. 11, Scripting the Service Encounter

Ch. 13, Service Recovery

 

Case: Northwest Airlines/Detroit Storm 9-800-053

 

Discussion Questions:

 

 

Video: Northwest Airlines

 

CONSOLIDATION OF FRAGMENTED INDUSTRIES

 

Packet Reading: "The Consolidation of Highly Fragmented Service Industries: Rollup"

 

Case: VITAS: Innovative Hospice Care N9-800-031

 

The case places Vitas in the context of the history of the hospice movement, which began in Great Britain in the mid-twentieth century. Vitas is a for-profit national organization serving approximately 5,000 patients daily using "state of the art" management techniques.

 

Assignment Questions:

 

 

Session # 14 (December 4)

 

PROJECT PRESENTATIONS


Fall 2001 NEW SERVICE DEVELOPMENT Fitzsimmons

 

Session Date Topic Case

 

Module 1: The Service Profit Chain

 

1 9/4 The Service Profit Chain

 

2 9/11 Building Profit Chain Capability Enterprise Rent-A-Car

Service Profit Chain in Action Taco Bell-1994

 

3 9/18 Designing Service Delivery Systems

Benchmark Service Design Southwest Airlines-1993

 

Module 2: New Service Development Process

 

4 9/25 New Service Innovation Alaska Airlines

Anticipating Service Needs

 

5 10/2 Creating a Strategic Service Vision Willow Creek Community Church

New Service Development

 

6 10/9 Conjoint Analysis and Service Design Sunday River Ski Resort

 

7 10/16 Creating a Service Culture Hal Rosenbluth (A)

Knowledge Intensive Services Hal Rosenbluth (B)

 

Module 3: Service and the Internet

 

8 10/23 Combining Click with Mortar Rosenbluth Travel & Biztravel.com

Delivery of Electronic Service Amazon.com

 

9 10/30 Internet Retailing E-business Innovation at Golfsmith

Customer Support and Logistics Service and Value in E-Commerce

 

10 11/6 Staging the Internet Customer Experience Sothebys.com

Providing Information via the Internet Four Seasons Hotels and Resorts

Module 4: Issues in New Service Design

11 11/13 Service Guarantee Westlake Cinemas

Customer Selection and Retention Air Miles Canada

 

12 11/20 Simulation Modeling of Service Systems Renaissance Clinic

 

13 11/27 Service Recovery Planning Northwest Airlines/Detroit Storm

Consolidation of Fragmented Industries Vitas: Innovative Hospice Care

 

14 12/4 New Service Design Presentations

 


New Service Development

Case Write-up and Discussion Choices

 

 

Date

Due

Harvard Case

Write-up Priority

(Make 6 Choices)

Discussion Priority

(Make 3 Choices)

9/11

Taco Bell-1994

 

 

9/18

Southwest Airlines

 

 

9/25

Alaska Airlines

 

 

10/2

Willow Creek Church

 

 

10/9

Sunday River Ski Resort

 

 

10/16

Hal Rosenbluth (A)

 

 

10/16

Hal Rosenbluth (B)

 

 

10/23

Rosenbluth & Biztravel.com

 

 

10/23

Amazon.com

 

 

10/30

E-business at Golfsmith

 

 

11/6

Sothebys.com

 

 

11/6

Four Seasons Hotels & Resorts

 

 

11/13

Air Miles Canada

 

 

11/27

Northwest Airlines

 

 

11/27

Vitas: Innovative Hospice Care

 

 

 

 

Team Members: _________________________________

 

_________________________________