STATE OF THE ART IN SERVICE DESIGN AND MODELLING

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STATE OF THE ART IN SERVICE DESIGN AND MODELLING

M.T. ALONSO-RASGADO, G. THOMPSON AND O.J. DANNEMARK

University of Manchester and Volvo Aero Corporation

Abstract: This document comprises the literature review on Service Design and modelling which constitutes the first deliverable of the task 2.1.4 in WP. 2.1,Extended Jet Engine Enterprise Scenario. The literature review draws on information from over one hundred international journal papers and books focusing on service design and modelling. The aim of this literature review is to obtain in-depth knowledge of historical and current service design practices; this information will enable the development of a design methodology for services in the context of total care products (TCP’s).

The recommendation for further work is to define a service system statically and perform test modelling of the selected service system in a computational tool that allows dynamic simulation.

Dissemination: PU

Deliverable/Output n°: D2.1.4_1 Issue n°:1 1

Keywords: Service design, service modelling, total care products

VIVACE State of the Art in Service Design and Modelling This document is classified as VIVACE Public



TABLE OF CONTENTS

1. EXECUTIVE SUMMARY ...................................................................................4

2. DEFINITION ......................................................................................................5 2.1. INTRODUCTION........................................................................................................5 2.2. SERVICE MARKETING CONTEXT...........................................................................5

2.2.1. DEFINITION OF SERVICE FROM THE MARKETING VIEWPOINT..................5 2.2.2. CHARACTERISTICS OF SERVICES.................................................................6 2.2.3. FUNCTIONAL DIFFERENCE .............................................................................8 2.2.4. CLASSIFICATION OF SERVICES .....................................................................9

3. SERVICE DESIGN ..........................................................................................10 3.1. DEFINITION OF SERVICE DESIGN .......................................................................10 3.2. STRATEGIC ASSESSMENT ...................................................................................12 3.3. SERVICE DESIGN METHODOLOGY .....................................................................13

4. CONCEPT DEVELOPMENT ...........................................................................14 4.1. INTRODUCTION......................................................................................................14 4.2. IDENTIFICATION OF CUSTOMER NEEDS............................................................14

4.2.1. MARKET REQUIREMENTS .............................................................................17 4.2.2. COLLECTION OF THE DATA ..........................................................................17 4.2.3. DATA INTERPRETATION................................................................................19 4.2.4. HIERARCHICAL ORDER OF NEEDS..............................................................20 4.2.5. IMPORTANCE OF THE NEEDS ......................................................................20 4.2.6. RESULTS ANALYSIS.......................................................................................21

4.3. SPECIFICATION OF THE DESIGN REQUIREMENTS...........................................21 4.3.1. INTRODUCTION ..............................................................................................21 4.3.2. METHODOLOGY..............................................................................................22

4.4. CONCEPT DESIGN FOR SERVICES .....................................................................25 4.4.1. DEFINITION......................................................................................................25 4.4.2. METHODOLOGY..............................................................................................26

5. SYSTEM DESIGN ...........................................................................................29 5.1. INTRODUCTION......................................................................................................29 5.2. METHODOLOGY.....................................................................................................31

6. TESTING AND IMPLEMENTATION ...............................................................34




6.1. TESTING..................................................................................................................34 6.2. IMPLEMENTATION .................................................................................................35

7. SERVICE MODELLING...................................................................................36 7.1. INTRODUCTION......................................................................................................36 7.2. STATIC MODELS ....................................................................................................38 7.3. MOLECULAR MODELLING APPROACH................................................................38

7.3.1. DESCRIPTION .................................................................................................38 7.3.2. EXAMPLES.......................................................................................................40

7.4. SERVICE BLUEPRINT APPROACH .......................................................................42 7.4.1. INTRODUCTION ..............................................................................................42 7.4.2. EXAMPLES.......................................................................................................43

7.5. STRUCTURED ANALYSIS AND DESIGN TECHNOQUE (SADT)..........................48 7.5.1. INTRODUCTION ..............................................................................................48 7.5.2. APPLICATION ..................................................................................................49

8. CONCLUSIONS AND RECOMMENDATIONS ...............................................54 8.1. Conclusions .............................................................................................................54 8.2. Recommendations for futher work ...........................................................................54

9. REFERENCES ................................................................................................55




1. EXECUTIVE SUMMARY

The present high level of competition in the global market, combined with the perfection of hardware technology and the increased demands of customers, has created a need for new innovations in the way that products are offered. In response to these needs the concept of Total Care Products (TCP’s), sometimes known as Functional Products has emerged. These products are integrated systems comprising hardware and services where services are the set of functions or activities that enable the hardware to be integrated into a total functional provision. The success of Total Care Products therefore depends upon both hardware and services.

In order to produce the service element of a total care product, the service element must first be designed. Knowledge of services in general is required as a pre-requisite to specific aspects of service design. The objective in reviewing current practices in service design in general is to be able to adapt existing methodologies for use in the service design process in the context of total care products.

This document comprises a literature review in service design taking in papers and books written by researchers from the USA, Sweden, UK, Germany, Chile, Switzerland and Brazil, published in journals including Marketing Science, the Service Industries Journal, International Journal of Services, European Journal of Marketing, Journal of Operation Management amongst others.

Various topics related to services have received attention from researches over the years including: service quality [Parasusrama et al (1985)], service failure and recovery [Schlesinger and Heskett (1991), Michel (2000)], how services benefit industry [Gadrey and Gallouj (1995)], the selection of service specifications [Swan et al (2002)], the analysis of service operations [Bitran and Lojo (1993)], human issues in service design [Cook et al (2002)] and case studies involving modelling of services [Bitran and Mondeschein (1995)], to mention but a few. However for the purpose of this document the focus will be on service design and modelling methodologies.

In this document definitions of ‘what is a service’ are presented. From the literature, distinct stages can be identified in the service design process. The findings for each stage are reviewed, described and discussed in detail. The importance of service modelling in the service design process is highlighted. Historical practices relating to service modelling are described and the different approaches reviewed. The merits and weaknesses of each approach are discussed. This information will be of use in the development of a modelling approach for services in the context of total care products. Finally, conclusions and recommendations for further work are presented.




2. DEFINITION

2.1. INTRODUCTION

Historical definitions of services date back to 1750 when the Physiocrats defined a service to be ‘all activities other than agricultural production’. This was further refined by Adam Smith (1723-90) to be ‘all activities that do not end in tangible products’. Differing views and definitions of what constitutes a service continued to be aired as society and industry changed [Cowell (1984)]. Today, a common understanding of what a service is has been generally accepted in industry and academia. The International Organisation for Standardisation (ISO, 1991) defines services as: a subset of a product. A product being the result of a production process. The definition of a service can perhaps more easily be understood by contrasting services with traditional products. Shostack (1981, 1984a) pointed out the difference between products and services stating that ‘a product is defined by its existence in both space and time, and is tangible, whereas a service does not have a spatial element to it, but is defined in time’.

A service consists primarily of processes and can only be experienced, created or participated in. It is produced and consumed simultaneously, consequently the quality of the service by its nature will therefore be variable. Johne and Storey (1996) correctly noted that services have a limited life and consequently, unlike products, cannot be held in stock. At the time of writing, service developments are not patentable [Cowell (1984)]. This has lead to little expenditure being directed towards innovation in this area. Instead, any investment has gone towards improving existing services rather than developing innovative new concepts [Cowell (1988)].

2.2. SERVICE MARKETING CONTEXT

In order to clarify what are services in the context of Marketing a number of ways are used. They are as follows:

• Definition of services.

• Characteristics of services.

• Functional differences.

• Classification of services.

2.2.1. DEFINITION OF SERVICE FROM THE MARKETING VIEWPOINT

The most recent American Marketing Association definition of services is:




Services are those separately identifiable essentially intangible activities which provide want-satisfaction, and that are not necessarily tied to the sale of a product or another service. To produce a service may or may not require the use of tangible goods. However when such is required, there is no transfer of title (permanent ownership) to these tangible goods. [Stanton (1981)]

Stanton makes clear that activities like medical care, entertainment and repair services are included but credit, delivery and other services which exist only when there is the sale of a product or another service are excluded. He recognizes that the consumer may take temporally possession or make temporary use of any good that may be required in the production of a service. He agrees with the idea of Gronroos (1978) that the service is the object of the marketing i.e. the company is selling the service as the core of its market offering.

Kotler (1982) provides a definition that is essentially similar in nature, namely:

A service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.

Cowell (1984) identified the common elements of these definitions as being:

Their emphasis is, directly or by implication, on the essentially intangible nature of a service. This intangibility of the service corresponds to one of the characteristics of services, which could also be used as a definition.

2.2.2. CHARACTERISTICS OF SERVICES

There are five principal characteristics that help distinguish services from products, namely.

• Intangibility

• Inseparability

• Perishability

• Ownership

• Heterogeneity

The combination of these characteristics creates the specific context in which a service organization must develop its marketing policies.

2.2.2.1. INTANGIBILITY

It is not possible to taste, feel, see, hear or smell services, consequently they are intangible. Whilst the customer may receive something tangible to represent the service, the purchase of a service remains the purchase of something intangible. Wilson (1972) suggested that the concept of tangibility could be sub-divided as illustrated in Table 1.




Concept of Tangibility

Degree of Tangibility Producer Services Consumer Services

Services that are essential intangible

Security, communication systems, franchising, mergers and acquisitions, valuations

Museums, auctioneering, employment, agencies, entertainment, education, travel services

Services providing added value to a tangible product.

Insurance, contract maintenance, engineering consultancy, advertising, packaging

Launderettes, repairs, personal care, insurances.

Service that makes available a tangible product

Wholesaling, transport, warehousing, financial services, architecture.

Retailing, automatic, vending, mail order, hire purchase, charities, mortgages.

Table 1 Concept of tangibility [Adapted from Wilson, Marketing of Professional Services (1972) p.8]

Bateson (1977) further refined the concept of intangibility as follows:

Intangibility is the critical characteristic distinguishing products from services and that intangibility means both ‘palpable’ intangibility (i.e. the service cannot be touched by the consumer) and mental intangibility (i.e. the service is difficult for the consumer to grasp mentally)

Two aspects of intangibility account for some of the characteristics which distinguish product from service marketing [Bateson (1977)]. These characteristics are :

• A service cannot be touched.

• There is no ownership transfer.

• Precise standardization is difficult.

• A service cannot be patented.

• There are no inventories of the service.

• Production and consumption are inseparable.

•

2.2.2.2. INSEPARABILITY

Cowell (1984) points out that services often cannot be separated from the person or the seller. A consequence of this is that creating or performing the service may occur at the same time as full or partial consumption of it. Goods are produced, sold and consumed whereas services can be sold and then produced and consumed.




2.2.2.3. PERISHABILITY

Services are, by their nature, perishable and cannot be stored. Spare seats on an airliner or an empty hotel room represent lost capacity that cannot be recovered. Fluctuating demand can often aggravate the perishability feature in the case of some services. In such cases, vitally important decisions have to be taken as to what maximum capacity level should be available to cope with sudden increases in demand before service levels suffer. Equally, during periods of low level demand decisions need to be taken as to whether to allow spare capacity to lie idle or whether to implement short-term policies (e.g. differential pricing, special promotions) to even out fluctuations in demand.

2.2.2.4. OWNERSHIP

One of the main and most noticeable of the differences between the service industry and the product industry is lack of ownership. In the case of a service, the customer may only have access to or use of a facility (e.g. a hotel room, a credit card etc.). Payment is for the use of, access to, or hire of items. With the sale of a tangible good, the buyer generally has full use of the product, one exception being restrictions imposed say by a hire purchase scheme.

2.2.2.5. HETEROGENEITY

The standardization of output in services is difficult to achieve in practice. One `unit' of a service may differ from other `units', despite the development and employment of standard systems, for example to handle flight reservations, to book in a customer's car for service or to quote for life or car insurance. Franchise concerns usually try to ensure a standard of conformity of service output, however, in practical terms it is often difficult to ensure a uniform level of service output in terms of quality. In addition, customers generally find it difficult to judge quality in advance of purchase; note, however, that this can also be true in product marketing.

2.2.3. FUNCTIONAL DIFFERENCE

This approach contrasts service with goods marketing. Judd (1968) utilises this approach when identifying the following differentiating features between goods and services.

• Channels of distribution for services, where they exist, are short:

• Services cannot be stocked;

• Standards cannot be precise in the services sector because of the absence of mass production;

• Services lack the use of packaging;

• Services lack patent protection;

• Services cannot be sampled;




• Economic concepts of supply and demand and costs are difficult to apply to services because of their intangible nature;

• There appears to be limited concentration in the services sector of the economy;

• monetary values are more likely to be expressed in terms other than of `price';

• Symbolism derives from performance in the case of services rather than from possession.

The difficulty with this approach is that there are problems in defining functional features which accurately and precicely delimit the differences between goods and services. Like the `characteristics of services' approach a number of exceptions to the general principles seem to exist [Cowell (1984)].

2.2.4. CLASSIFICATION OF SERVICES

A variety of schemes which attempt to classify services have been suggested. There is some debate as to whether classification is itself useful or not. Those against feel that classifications can be misguiding, causing marketers to become misdirected in their thinking. They also feel that classifiying services can lead to the perpetuation of a product orientation [Huges (1978).]. Those in favour, think that classification is a vital first step in obtaining an understanding of the ways in which markets operate, providing an enlightening insight into the ways products are bought, including reasons for the purchase. A service marketing organization can use this information to analyse their current market strategtes for services and in so doing, make recommendations for future development. To-date, many of the classification schemes advocated have been based on those utilised in the marketing of tangible goods and rely upon the particular assumptions adopted as to what constitutes a service. The three most common ways of classifying services are illlustrated inTable 2.

Seller Related Based

Nature of enterprise Functions performed Income source

Private, for profit

Private, non-profit

Public, for profit

Public, non-profit

Communication

Consulting

Educational

Financial

Health

Insurance

Derived from market

Market plus donations

Donations only

Taxation




Buyer Related Based

Market type Way in which service bought Motives

Consumer market

Industrial market

Government market

Agricultural market

Speciality service

Unsought service

Convenience service

Shopping service

Instrumental i.e.

means to an end

Expressive i.e.

an end in itself

Service Related Based

Service form Human or machine based High or low contact

Uniform service

Bespoke service

Human centred service

Machine centred service

High contact service

Low contact service Table 2 Current ways of classifying services. Source:[Cowell 1984].

A `Seller Related' basis is a common method of classification. This means of classificiation leads to service marketing organizations being classified according to whether they are `private' or `public'. There are further sub-divisions within each grouping as to whether the services are `profit motivated' or `non-profit' motivated.

Another factor used for a classification base is the ‘function performed' by the organization. The function could, for example, be educational, health, insurance or financial.

The means by which an organisation obtains its income can also be used to classify services. Service marketing organizations may have as their ’source of income', taxation, the marketplace, donations or their income may be derived from a combination of sources.

If a `Buyer Related' basis is utilised for classifiication, then the categories considered include the type of market, consumer, industrial, goverment or agricultural; the way in which the service is bought, as a convenience, shopping, speciality or unsought service: and the motives for the purchase, instrumental (means to an end) or expressive (an end in itself).

The third classification method is ‘Service Related’ based where the categories may include service form (uniform or bespoke), human or machine based (human or machine centred service) and levels of personal contact (high or low contact service).

3. SERVICE DESIGN

3.1. DEFINITION OF SERVICE DESIGN

The International Organization for Standardisation [ISO 1991] goes some way to providing a definition of service design. In the Guidelines for Services, Quality Management and Quality System Elements, the process of designing a service is described as one that;




• Involves converting the service brief (customer needs) into specifications for both the service and its delivery and control, while reflecting the organization’s options (i.e. aims, policies and costs)

• The service specification defines the service to be provided, whereas the service delivery specification defines the means and methods used to deliver the service. The quality control specification defines the procedures for evaluating the controlling the service delivery characteristics.

• Design of the service specification. The service delivery specification and quality control specification are interdependent and interact trough the design process. Flow charts are a useful method to depict all activities, relationships and interdependences.

• The principle of quality control should be applied to the design process itself (p.9).

Edvardsson and Olsson (1996) take issue with the ISO’s definition, arguing that;

• The ISO does not see the customer as part of the service system but as outside it. The demand for and need of adjustment to the resources and conditions prevailing at the customer’s are not taken into account, at least not explicitly.

• The ISO wording is an indication that its approach to reality is still informed by the logic of industrial production rather than of service production.

• The ISO standard has adopted a process approach. Developing services is thus a matter of creating conditions for producing added value for the customer. The ISO point out that the development of flow charts is a useful method of specifying activities, relations and dependencies in the service process. The process is termed ‘service delivery’ which implies supplier activities necessary to provide the service.

• The ISO defines the customer as the recipient of a product or service. They have still not learnt, apart from being the recipient of the service the customer (if not in all service production) can be a co-producer to a greater or lesser extent.

Both products and services may consist of tangible and intangible components. An increasingly competitive market place means that companies must not only attempt to design and produce superior products, but these products must be supported by an efficient and effective service support system. As the differential between alternative hardware solutions narrows, the design and implementation of appropriate supporting services becomes progressively more important. Bitran and Pedrosa (1998) provide as an example the recent introduction of a line of cars with a differentiated network of dealerships and supporting services. This example illustrates the point that in terms of services, companies are being required to look for ways to make their operations more reliable, consistent, and replicable at the global level. Bitran and Pedrosa (1998) also make the important observation that:

The greater the intangible component of a product or service, the more difficult it is to understand what the customers want, why they want it and how to deliver it.




3.2. STRATEGIC ASSESSMENT

The design and production of a new service or product is highly significant impacting on both the profitability of the company and its future prosperity. It is therefore imperative that the company begins the development process of the service with a strategic assessment. Hax and Majluf (1991) propose a strategic framework to underpin the service development process; the framework, consisting of four phases, is illustrated in Figure 1.

Figure 1. Activities of a strategic assessment.

The four phases are [Hax and Majluf (1991)]:

• Definition of Mission: the ‘Mission Statement’ is generally determined by the firm’s long-term strategy and can be classified into two types :Degree of concept and degree of market innovation.

• External analysis: this phase consists of identifying trends, threats and opportunities in the industry by gathering data about suppliers, customers, competitors, substitutes, regulations and other relevant aspects.

• Internal Analysis: this phase is concerned with determining how the new product or service fits in the firm’s current offering and how it will impact the firm’s operations. In addition, the skills, resources and capabilities required in the development effort are determined.

• Strategic Analysis: weights the information generated by the internal and external analysis to generate:

• Marketing requirements (business opportunities, market segment and positioning)

• Strategic requirements, e.g. use of a certain technology, expansion into a new market etc.

• Regulation requirements, e.g. health, safety requirements for the new service etc.

Mission Statement

External

Analysis

Internal

Analysis

Strategic

Analysis

Marketing Requirements

Strategic Requirements

Regulations Requirements

Source: Bitran and Pedrosa (1998)




Once the strategic assessment has been performed then a decision can be made, based on the information obtained from the assessment, as to whether to proceed with the development of the proposed service. Assuming that the decision to go ahead with the development of the proposed service has been taken, then the service design process can begin in earnest. Several distinct stages can be readily identified in the service design process; these are described in detail in the following section.

3.3. SERVICE DESIGN METHODOLOGY

From a thorough and comprehensive review of the literature available on service design, it was found that the service design process is similar to the hardware design process [Bitran and Pedrosa (1998)], Figure 2 shows the service and hardware processes side-by-side. The similarities between the service and hardware design processes can be seen in this figure. Three distinct stages can be readily distinguished in service design, each of the stages consisting of different steps. These steps have equivalent steps in the hardware design process [Pugh (1990), Hollins and Hollins (1991)]. Both hardware and service design processes start by obtaining an understanding of customer’s needs [Ulrich and Eppinger 1995, Andersen 1983, Von Hippel 1986]. Once the customer’s needs have been identified the following step involves the specification of the requirements [Swan et. al (2002)] and then the concept design phase begins [Pugh (1990), Ulrich and Eppinger (1995)]. In the service design process, these three steps are grouped together in the Concept Development Stage. The second stage in the process is System Design, where specific design details of the service are produced. The final stage consists of testing and implementation of the service designed.

The three stages of the service design process will be described and reviewed in the context of the literature available to date. These stages are summarised as follows:

I) Concept Development

• Identification of customer needs

• Specification of the requirements

• Concept design for Service.

II) System Design

• Design details

III) Testing and Implementation.




Figure 2. Comparison of service and hardware design processes.

4. CONCEPT DEVELOPMENT

4.1. INTRODUCTION

Having determined the marketing requirements (strategic assessment) for the proposed new service the next stage in the development process consists of identifying and understanding the needs of the customer. This stage focuses on what the customer needs and expects from the service. Appropriate methodologies and tools are utilised in order to successfully ensure that the ‘voice of the customer’ is heard and understood. Having obtained the customer requirements, these are combined with the requirements identified in the strategic assessment and together these needs are utilised in the determination and creation of appropriate attributes for the new service.

4.2. IDENTIFICATION OF CUSTOMER NEEDS

This is the first stage in the service design methodology, and is concerned with understanding customer needs. In order to be able to fully and accurately understand customers needs and wishes it is vitally important in the design of the new service to involve the customer in the process. It is vital that the service developer recognises the important role that the customer plays in the service development process and therefore engages in meaningful dialogue with customers to enable them to describe their needs, requirements and wishes. The correspondence between customer needs and service offer is crucial for a successful service.

Specification of Requirements

Detailed Design

Identification of Customer’s Needs

Concept Design

Testing and Implementation

System Design

Concept Development

Service Design Process

Hardware Design Process

Testing




Quality Function Deployment or QFD for short, is a total management system that has been utilised to advantage by numerous companies particularly in the US and Japan in recent times. QFD encourages customer interaction by aiming to ensure that customer needs are considered throughout all stages of the product development process. Griffin and Hauser (1993) discuss how QFD can facilitate new product success by encouraging customer needs to be taken into consideration during product development and by increasing cooperation between the marketing, manufacturing, engineering and research and development activities. They note that QFD improves communication among these functions by associating customer needs with engineering, manufacturing, and R&D decisions. Data in a QFD system is represented in a clear, visual manner, enabling ease of use and interpretation. Four what are termed ‘houses’ are used to deliver data, namely [Griffin and Hauser (1993)]:

House one: This house links customer needs to design attributes.

House two: This house links the design attributes to activities that can be undertaken by the company.

House three: The activities are linked to decisions concerning implementation in house three.

House four: Links the implementation to production planning.

The output from this stage is a crucial and integral part of the concept development phase of the service development process. The resulting customer needs along with the results from the strategic assessment form the set of guidelines that the service development team will use in the phases following the identification of customer needs phase, to build the product and service concepts and specifications, which are then utilised to produce the detailed design.

To ensure that customers’ needs are fully understood it is important that strong lines of communication are created between the customer and the product developers and designers. This ensures that high quality information can flow between the two parties.

Bitran and Pedrosa (1998) suggest that the methods reviewed by Griffin and Houser (1993) in their paper could be utilised to identify and understand customer needs. The techniques Griffin and Houser (1993) compare are used to identify, group and rank customer needs. They articulate the importance of identifying three types of customer need:

• Basic needs: what a customer assumes a supplier will do

• Articulated needs: what a customer will tell you that he or she or they want a supplier to do




• Exciting needs: those needs which, if they are fulfilled, would delight and surprise the customer

Burchill and Shen (1992) identify customers’ needs by clustering similar labels containing customers’ opinions using questionnaires to classify needs in five categories:

• Must-be: minimum requirement

• Attractive

• One-dimensional: the more of the attribute the better

• Indifferent

• Reverse: the more of the attribute the worse.

Andersen (1983) contends that the difference between rational and emotional needs should be distinguished as should existing and future needs. Von Hippel (1986) correctly identifies that future needs are inherently difficult to forecast. He proposes that a solution to this problem is to focus on what he terms ‘lead users’ of a product or process. These lead users are considered a good source of customer needs because they experience new needs before the majority of the marketplace, potentially, being able to benefit substantially from new product innovations ahead of rivals. Lead users also have the advantage that they are generally able to express their needs more precisely and eloquently. Von Hippel (1986) goes on to explore how lead users can be identified and used in the determination of emerging needs for new products and services.

Edvardsson and Olsson (1996) suggest that when referring to customer’s needs that it is useful to distinguish between primary and secondary needs.

• Primary needs are those which act as a ’trigger’, i.e. the reason why the customer experiences a certain need.

• Secondary needs are needs which come about due to the result or service chosen.

Latent needs are also important, being those that customers recognize as important in the final product but that they hadn’t thought of during the development stage. These needs are important in terms of customer satisfaction and therefore must be considered in addition to the explicit needs.

Griffin and Hauser (1993) note that identifying customer needs is primarily a qualitative research task. The process by which customers’ needs are identified has been discussed in some depth by Ulrich and Eppinger (1995). In their discussion they present a six step methodology that they recommend be utilised to identify the needs of the customer. These six steps are:

1. Market requirements.




2. Collection of the data.

3. Data interpretation.

4. Hierarchical order of needs.

5. Importance of the needs.

6. Results analysis.

4.2.1. MARKET REQUIREMENTS

This step is usually undertaken during the product or service planning stage prior to detail development [Ulrich and Eppinger (1995)] it is concerned with specifying the opening in the market that the development effort is responding to and attempts to set out in broad terms, the general aims and limitations of the undertaking. Often, the information obtained is turned into a ‘mission statement’, ‘charter’, or ‘design brief’ [Ulrich and Eppinger (1995)]. The mission statement is usually short on specifics, acting as only a general guide as to the direction to be taken.

The mission statement may include the following information:

• A short description of the product or service, typically one sentence in length, including the principal benefit to the customer of the product. Product concept specifics are generally avoided.

• The key business goals of the undertaking, including such information as performance targets, financial, market share etc., and the planned introduction of the product or service to the market.

• Product target market. The primary and secondary markets for the product are identified. This information will be of importance during the development process.

• Assumptions that may limit or restrict the development process. Assumptions, whilst limiting the scope of the potential product concept solutions, make the project more manageable. Much care and thought must be taken when defining and debating potential assumptions.

• Stakeholders. This is a list of all the groups of people who will be affected by the product, including ‘external’ customers (the customer who makes the decision to buy the product, the customer who is actually the end user), and ‘internal customers’ (sales force, production and service departments of the supplier). Such a list is important during the development process and ensures that all stakeholders’ needs, internal and external, are taken into consideration.

4.2.2. COLLECTION OF THE DATA

This step involves direct contact with customers and the environment in which the product or service will be utilised. Strong lines of communication are required between the customer and the supplier to ensure that high quality information can flow between the two parties. Three common techniques used to gather raw data are the use of interviews, focus groups and observation in use.




• Interviews: These are usually held in the customer’s surroundings where members from the development team talk over customer needs with a single customer. Interviews usually last for a maximum of two hours or so. The interview usually ends when the interviewer feels that no new needs can be extracted from that customer. Techniques that may be employed in interviewing scenarios include, amongst others, the laddering and means-ends techniques [Gutman (1982), Reynolds and Gutman (1988)] and benefit chains [Morgan (1984)].

• Focus groups: This usually involves a group of 8 to 12 customers and a presiding officer undertaking a discussion of one to two hours in length, in a room that is usually equipped specifically for such discussions. Development team members often observe the proceedings through a two-way mirror and/or examine a videotape of the meeting. The customers who agree to take part are usually paid a nominal fee. In recent years, companies have sprung up that offer focus group facilities for rent.

• Observation of the product/service in use: Important information concerning customer needs can often be obtained by observing customers in their use of existing products or services in their undertaking of a task for which a new product or service is to be developed. Information is obtained by interaction with the customer to varying degrees. For example, development team members may simply observe the customer. On the other hand, it may be more beneficial in certain circumstances for members of the development team to work alongside the customer, thus gaining valuable information and experience directly from the source.

In addition to the three techniques described above, some companies use written surveys to gather information. Ulrich and Eppinger (1995) note that this type of survey should not be used in the initial stages of identifying customer needs as they do not provide sufficient information as to the environment in which the product is to be used and are ineffective in revealing unanticipated needs. They do note, however, that this type of survey may be of use in the later stages of the development process.

Ulrich and Eppinger (1995) recommend the use of interviews over the use of focus groups. In their argument they cite the research undertaken by Griffin and Hauser (1993) who report that a two-hour focus group session uncovers approximately the same number of customer needs as two one-hour interviews (Figure 3). Ulrich and Eppinger (1995) base their argument firstly on economics, interviews usually being less costly (per hour) than focus groups, and secondly on the observation that interviews enable members of the product development team to observe the environment in which the product is to be used. They recommend that ‘interviews be the primary data collection method, possibly supplemented with one or two focus group sessions as a way to allow top management to observe a group of customers or as a mechanism for sharing a common customer experience (via videotape) among the members of a larger team.’




Figure 3. Comparison of the percentages of customer needs identified and number of interviews of groups.

4.2.3. DATA INTERPRETATION

Customer needs emerge from interpreting the raw data obtained from customers. Needs are usually expressed as written statements [Ulrich and Eppinger (1995)]. Griffin and Hauser (1993) recommend that the process of translating the raw data into customer needs should be done by more than just one person, as their studies found that multiple analysts translate the same interview notes into different needs.

Ulrich and Eppinger (1995) provide five guidelines for use in writing needs statements. Two of the guidelines they class as fundamental and crucial for accurate translation, those being:

Express the need in terms of what the product/service has to do, not in terms of how it might do it. The needs should be expressed in terms that avoid espousing the use of any particular technology.

Express the need as specifically as the raw data. In order to avoid loss of information needs should be expressed to the same level of detail as the raw data.

The remaining three guidelines are concerned with developing consistency of phrasing and style. In brief, these three guidelines are:

Use positive, not negative, phrasing. Translation of a need into a product /service specification is easier if the need is expressed as a positive statement.

Express the need as an attribute of the service (or user of the service). This ensures consistency and makes the process of translation into product/service specifications easier.

Avoid the words must and should. The words must and should imply a level of importance for the need, so avoid them at this stage.

Subsequent steps in the development process utilise the needs that have emerged this far and incorporate into the process any technical and/or economic constraints that may apply.




4.2.4. HIERARCHICAL ORDER OF NEEDS

At this point in the development process the team should have a relatively long list of detailed needs. In order to proceed efficiently and effectively it is prudent to put the needs in some form of hierarchical order. Primary, secondary and tertiary needs are identified and grouped. The primary needs are those that are the most general needs, whereas the secondary and tertiary needs contain the real detail.

Ulrich and Eppinger (1995) point out that the procedure for organizing the needs into a hierarchical list is intuitive, so this task is usually carried out by development teams without the need for detailed instruction on how to perform the task. The authors do however, provide a six step procedure that if followed step by step enables the list of needs to be ranked hierarchically. In brief, the six part procedure consists of the following:

• Print or write each need statement on a separate card or piece of paper.

• Eliminate redundant statements.

• Group the cards according to the similarity of the needs they express.

• For each group, choose a label that represents or generalises all of the needs in the group.

• Consider creating a third level in the hierarchy ("super-groups") if a two-level hierarchy is not sufficient to organize the data.

• Review and edit the organized needs statements, consider alternative groupings or labels.

4.2.5. IMPORTANCE OF THE NEEDS

The hierarchical list does not indicate the perceived or relative importance of the needs. Assigning relative importance to the needs is essential as it enables the development team to make important decisions regarding compromises and resource allocation. Ulrich and Eppinger (1995) describe two basic numerical weighting approaches for needs, namely:

• Rely on the consensus of the team members based on their experience with customers.

• Base the importance assessment on further customer surveys.

The authors believe that the additional cost and time incurred by employing the second method are offset by the superior results obtained. In addition, a start can be made on other development tasks such as concept generation before the results of the additional surveys are in. It is recommended that the same group of customers be surveyed to rank




the needs as were used previously at earlier stages in the development process. Mechanisms for undertaking the survey include mail, email, telephone or in person. Ulrich and Eppinger (1995) recommend that in practice, the customer survey should restrict itself to between 20 and 30 needs, targeted due to the importance of the need in making decisions concerning trade-off and economics. Numerous survey designs exist, that enable the relative importance of customer needs to be established.

Bitran and Pedrosa (1998) suggest a scientific approach to the ranking of customer needs, noting that conjoint analysis and utility functions are two tools that have commonly been employed for this. They describe the example of the application of conjoint analysis together with statistical and other marketing tools to the design of a new hotel concept [Wind (1989)]. The ranked customer needs when considered together with any marketing and regulation requirements lead to the specification of the design requirements for the service.

4.2.6. RESULTS ANALYSIS

This is the final step in the methodology. It is an important one as there is no exact or perfect solution. The development team must constantly challenge and reaffirm the results and conclusions drawn to ensure that the final output is consistent with the customer and organisation’s needs.

4.3. SPECIFICATION OF THE DESIGN REQUIREMENTS

4.3.1. INTRODUCTION

One drawback with customer needs statements is that they are invariably, by their nature, written in the language of the customer. As Ulrich and Eppinger (1995) note, these statements will contain expressions of a subjective nature, which although useful in providing insight into customer thinking and needs, provide little or no specific information or direction for the design of the product or service. In order to combat this development teams usually try to produce a list of specifications. These specifications aim to describe in exact detail what the product or service must do. They provide the team with an objective for their work in the attempt to satisfy customer needs. Ulrich and Eppinger (1995) note that some differences in terminology exist. For example, some companies use the terms ‘engineering characteristics’ or ‘’ product/service requirements’ in preference to ‘specifications’. Other companies refer to product/service design variables as ‘specifications’ or ‘technical specifications’. When referring to a particular specification, Ulrich and Eppinger (1995) state that this should invariably consist of a metric and a value for the metric, with the ‘value’ able to take one of a number of forms including a numeric value, range, inequality etc. Keeping this in mind, product specifications are then a collective set of individual specifications.




4.3.2. METHODOLOGY

Ulrich and Eppinger (1995) distinguish four steps in the process of establishing the target specifications, those being:

1. Preparation of the metrics list.

2. Benchmarking information.

3. Target values for each metric.

4. Results analysis.

4.3.2.1. PREPARATION OF METRICS LIST

Ulrich and Eppinger (1995) state that the connection between metrics and needs is crucial to the success of the specifications approach. The whole idea hinges on the ability of the development team to convert customer needs into clear and distinct specifications that if met, will adequately satisfy the requirements of the customer. As a consequence of this, the authors conclude that ‘the most useful metrics are those that reflect as directly as possible the degree to which the product or service satisfies the customer needs.’

The translation process from needs to specifications is not an exact science, so in order to ensure as accurate a translation as possible, the same team members should be involved in the translation as where involved in establishing the customer needs. This ensures clarity of meaning and removes uncertainties associated with interpretation. A sensible methodology to adopt when producing metrics is to take each of the customer needs identified in turn, then consider what metric can be employed to give a measure of how well the product/service satisfies that particular need.

Ulrich and Eppinger (1995) provide some cautionary points to consider when producing metric lists

• Metrics should be the dependent variables in the design problem. Metrics should constitute the dependent variables in the design problem as their function is to specify the overall performance of a service/ product.

• Metrics should be practical. It should be relatively easy and cost-efficient to evaluate the values of the metric, either through observation or analysis of the properties of the service/product.

• It may not be easy to translate some needs into measurable metrics. Needs concerning such things as feelings or emotions are subjective, and therefore difficult to quantify. In such circumstances the need is translated verbatim into a corresponding specification, and that specification earmarked as being of a subjective form.

• The metrics should include the popular criteria for comparison in the marketplace. Consumer reports and independent evaluations have become increasingly used and trusted by the consumer. For this reason, the development team should determine whether it is likely that the proposed product will be tested or evaluated in this manner. If this is the likely case, then the team should include as




metrics, those performance criteria upon which the product will be tested in the independent evaluation tests.

The relative importance of a metric is intrinsically related to the customer need it derives from. The relationship between the metric and the associated needs determines the importance rating of the metric. Ulrich and Eppinger (1995) recommend that importance weightings be determined by debate within the development team members. They believe that this is preferable to using some mathematical formula or weighting algorithm system.

4.3.2.2. BENCHMARKING INFORMATION

The commercial success of the new service/product largely depends upon the attributes and features of the product or service in relation to those of competing service/products. The market position of the new service/product relative to competitive services/products is determined by the development team utilising the service/product specifications. To aid in this decision process, information on rival service/products is usually collected (if it is possible).

Ulrich and Eppinger (1995) discuss two examples of benchmarking charts. In the first example competing service/products are ‘benchmarked’ against a proposed new service/product using the metrics established for the new product or service during the development process. The columns of the chart correspond to the competitive service/products and the rows correspond to the metrics. The authors note that whilst this concept of the benchmarking methodology is relatively straightforward, obtaining the data can constitute a significant time investment. The authors argue that this investment is necessary and essential for the success of the development process. The second benchmarking chart aims to compare customer perception as to how well rival service/products satisfy their needs. Customer needs are used as the rows of the chart with competing products/services as the columns. The data required for this type of benchmarking chart, i.e. customers’ perceptions, is particular expensive in terms of cost and time, to collect. Griffin and Hauser (1993) present techniques that can be utilised for obtaining and measuring customers’ perceptions.

4.3.2.3. TARGET VALUES FOR EACH METRIC

This stage involves the development team coming up with target values for the metrics, utilising all the information available to them. Ulrich and Eppinger (1995) distinguish two types of target values: ideal and marginally acceptable. The ideal is the maximum possible, the perfect value. The marginally acceptable is that value that would barely make the product a commercially viable concern. The target values are expected to be of significant benefit during the subsequent development stages, in particular in the concept generation and concept selection stages. The authors identify five means in which metric values can be expressed, namely:

At least X. These constitute the lower bound for a metric.

At most X. These are upper bounds on a metric.




Between X and Y. These specifications indicate both upper and lower bounds for the value of a metric.

Exactly X: These signify a target of a particular value of a metric. Ulrich and Eppinger (1995) recommend avoiding this type of target, and suggest employing where possible the ‘Between X and Y’ type.

A set of discrete values: Certain metrics may be expressed as a number of discrete values, with ranges possibly dependent upon values of other metrics. Ulrich and Eppinger (1995) recommend these types of specifications only be used at this stage where absolutely necessary. If they are to be used, then the authors recommend their introduction be during specification refinement.

In setting the target specifications the development team may utilise a combination of the five expression types for metric values. The list of metrics is taken and ideal and marginally acceptable values assigned for each metric. In setting these values the development team must take numerous factors into consideration including: proposed service/product target market, the mission statement and competing service’s/product’s capabilities.

At this stage it is hoped that more ideal target values will be met than marginally acceptable target values, which would give a good indication that an economically viable product is being developed. However, it is not until the concept and detailed design phases have been completed that a clear indication concerning the number of ideal and marginally acceptable target values that will be met can be obtained.

4.3.2.4. RESULTS ANALYSIS

Iteration is generally required during this phase in order to achieve agreement on the targets and to ensure that the development team stays firmly focused on the overall aims of the project. Ulrich and Eppinger (1995) offer suggestions as to the type of questions that the development team should ask themselves, when reflecting upon the results of the process. These questions include:

Is the marketing member of the team purposely setting inflated values for a metric in an attempt to push for greater results?

Have any specifications been left out or overlooked?

Should the team consider offering multiple service/products or at least multiple options for the service/product in order to best match the particular needs of more than one market segment, or will one "average" service/ product suffice?

The next stage in the development process is concept generation, where use is made of the target specifications in the creation and selection of an appropriate service or product concept.




4.4. CONCEPT DESIGN FOR SERVICES

4.4.1. DEFINITION

Various definitions of service concept exist in the literature. For example, Heskett (1986) defines service concept in terms of the organization’s business proposition as being the way in which the ‘organization would like to have its services perceived by its customers, employees, shareholders and lenders’. Collier (1994) coins the phrase ‘customer benefit package’ to signify the elements that provide both benefit and value to the customer and goes on to define service concept in terms of the ‘customer benefit package’.

To facilitate their definition of service concept Clark et al. (2000) and Johnston and Clark (2001) utilise four distinct sub-concepts, namely, service operation, experience, outcome and value.

• Service operation is used to signify the manner in which the service is delivered to the customer.

• Service experience refers to the direct experience that the customer has of the service.

• Service outcome encompasses the results and benefits of the service as experienced by the customer.

• Service value is a measure of the customer’s perceived benefit from the service compared against the cost.

Clark et al. (2000) recognise that it is important that all parties involved in service development, both customers and suppliers have the same vision or iconic mental representation of the proposed service, to ensure that the service concept is understood and interpreted in a similar manner by all. If this can be achieved then the gap between what the customer expects from the service and what the service actually delivers in practice can be minimised.

Goldstein et al (2002) states that the concept of identifying the individual components and elements of a service and utilising them to form the definition of the nature of the service has also been employed in the marketing literature where similar principles have been articulated [Lovelock et al. (1999), Booms and Bitner (1981) and McCarthy (1960)]. Goldstein et al (2002) also point out that the service concept acts as the integrative element between an organization’s business strategy and delivery of its service products; this point is illustrated in Figure 4.

Service strategy

People

Technology

Process

Physical facilities

Outputs

-service

outcomes

-service

experiences

Performance

Measurement

SERVICE CONCEPT

Service Delivery System




Figure 4: Service design planning model.

Edvardsson and Olsson (1996) define the service concept as being a detailed description of what is to be done for the customer and how this is to be achieved. They indicate that the service concept should cover a description of the needs and wishes of the customer and a definition of how these needs and wishes are to be met and fulfilled expressed in terms of the core and supporting services required. The authors recognise the important role that the process of service concept formulation plays in the development of a service. The importance that communication between customer needs and service offer plays is highlighted as is the need to obtain information on the customers to be served including a thorough understanding of the customer needs.

Lovelock and Wright (1999) split service concept into two parts: service marketing and service operations. The service marketing concept is concerned with the benefits to the customer, their needs and wishes, whereas the service operations concept is concerned with specifying the detail of how those needs and wishes are to be delivered by the service. Often it is felt that by employing and using phrases such as ‘service marketing concept’ that this encourages and forces companies to attempt to understand more fully the needs and requirements of their customers [Dibb et al. (1997)]. With a high level of understanding of the customer’s needs the company is more likely to provide a service solution that effectively and efficiently fulfils those needs and requirements.

4.4.2. METHODOLOGY

This stage can start once the customer requirements have been ranked enabling a rough sketch of the attributes, functions, products and services that together may satisfy the customer requirements to be generated. In the literature, much time and effort has gone into defining what is meant by the term ‘service concept’, but little work has been done in defining a methodology that can be applied when developing the service concept for a particular case in the real world. This fact has been commented on by numerous authors, most recently by Goldstein et al (2002) who note that, ‘…surprisingly little has been written about this central issue in service design and development’. Burchill and Fine (1997) suggest that whilst product concept development is one of the earliest tasks to be completed in the development of any product or service, this ‘front-end’ of the product development process is not well understood.

Definitions aside, little attempt has been made towards producing a methodology that can be used in the application of service concept during the service development process. Goldstein et al (2002) go some way in attempting to address this issue. They describe

Source: Goldstein et al (2002)




how service concept can be used to improve a variety of service design processes and illustrate the application of service concept to service design planning and the service recovery design process, indicating how the service recovery can be included in the design process. They identify the importance of using the service concept in service design and development. They see service concept as a missing link in service design research and with this in mind identify six key questions for research. The focus of the paper is on two of these questions, namely:

(i) How can service concept be utilised in the development and reviewing of a service?

(ii) In the design of the components of the service encounter, how can service concept be used?

Discussed in the paper is how service concept can be utilised during the service design planning phase, it being particularly important for integrating service strategy into the service delivery system and for determining appropriate performance tools for assessing service design. The example of service recovery, which is taken as being one component of service design, is used to demonstrate the usefulness of applying the service concept in the designing of the components of the service encounter.

According to Goldstein et al (2002) service concept includes the service strategy of what to deliver in terms of the market position and type of customer relationship, and how that strategy should be implemented i.e. the service delivery system that is to be employed. Key decisions in any service strategy include: a) the positioning of the service/product in the marketplace relative to the competitors (leading, in the main body, or lagging behind), and b) the nature of the relationship that the company would like to have with its customers (long, short or medium term relationship, one-off, time-constrained etc). Goldstein et al (2002) feel that a crucial dimension that is missing in companies is performance measures for the service delivery system. They argue that the service concept and related goals or specifications should be used as the basis for the foundation of appropriate performance measures for the service and note that to-date, the role of financial measures in the design of the service delivery system has not been investigated thoroughly by researchers.

Bitran and Pedrosa (1998) present an extensive literature review of product development from a service viewpoint. Three types of knowledge commonly required in the product or service development process are identified and discussed, namely:

1. Procedural plan and methods: the understanding of what components integrate the design

2. Architectural Knowledge: how the components of the design interact.

3. Models and principles describing physical or human behaviour in the system that is begin designed.

The first type of knowledge, that concerning the sequence of steps or procedural plan that must be followed in the development process, encapsulates concept development. The authors present a sequence of steps, illustrated in Figure 5, that are similar to those




proposed by Burchill and Shen (1992) and later updated by Burchill and Fine (1997) to represent the activities necessary for the development of a concept for a product or a service. The methodology employed by Burchill and Shen, termed ‘Concept Engineering’ consists of a structured process with supporting decision aids for developing product concepts by a product development team. The process alternates between the level of thought and level of data in a way that allows participants to understand what is important to the customer, why it is important, how it will be measured and how it will be addressed in the product concept.

Figure 5 Activities of concept development.

After determining the marketing requirements for the new product or service, the next step is the collection of the ‘voice of the customer’ using relevant methodologies and tools. Bitran and Pedrosa (1998) see that concept development starts with the identification of customer requirements (what customers need and expect to find in the product) The ‘marketing requirements’, ‘collecting the voice of the customer’ and ‘requirements ranking’ stages have been discussed in some detail in previous sections. The remaining part of this section deals with concept generation and concept selection and design attributes.

During the concept generation stage for services special attention must be paid to intangible elements as they will often form part of the service concept and are therefore essential in moulding the service experience.

Concept generation is the step during the development process when the development team consider what attributes and functions of the physical system will be required in order for the design requirements to be met. The team start by making a rough sketch of the products, services, functions and attributes that they believe are necessary. Each design requirement is considered and translated into corresponding attributes; in this manner the overall shape of the service system starts to form. Concepts are generated based on the emphasis placed on these attributes and their associated rankings.

Marketing Requirements

Collect the voice of the customer

Concept generation

Marketing/strategic Requirements

Requirements ranking

Concept Selection

Regulation/other Requirements

Customer Requirements

Design Requirements

Description concepts

Design Attributes





Ulrich and Eppinger (1995) provide the following definition for concept selection:

• Concept generation is the process of evaluating concepts with respect to customer needs and other criteria, comparing the relative strengths and weaknesses of the concepts, and selecting one or more concepts for further investigation or development.

• The authors list a number of methods that can be utilised in the concept selection process. They present a methodology of their own that they recommend be employed for this same purpose.

• Their scheme consists of two-steps, namely:

• Concept Screening: An existing technique [Pugh (1990)] that facilitates the combining of concepts in order to provide an improved solution.

• After Concept Screening: This consists of determining how well the concepts meet the design attributes by allocating scores weighted by the relative importance of the attributes.

• The concepts with the highest scores are allowed to pass on to the next phase.

5. SYSTEM DESIGN

5.1. INTRODUCTION

This phase of service development is concerned with the identification of the specific components that go to make up the design and the interaction between them. Bitran and Pedrosa (1998) report that ‘architectural knowledge’ is crucial at this stage. They define architectural knowledge as knowledge of the components that are integrated to form the service operation structure and how the components interlink.

Figure 6 illustrates the major components prevalent in most service operations, namely internal and external organisation, technology, customer interface, service and product mixes, customers, front-line and support employees.

• The people involved in a service system are categorised as being either customers or employees, with employees being subdivided into support and front-line based on the degree of contact with the customer. Employees that have direct contact with customers are termed front-line employees whereas those that are involved in the service process but don’t have direct interaction with the customers are termed support employees.

• Many service offerings consist of a mix of both tangible and intangible elements (product/service mix) between which it is often difficult to clearly distinguish.




• The internal and external organisational elements combined with technology together constitute the basic structure of the organisation, the infrastructure. The external part of the organisation is the part of the operation that is seen or experienced by the customer. The external organization is the unseen, unreachable portion of the operation.

• Technology can be of the hard or soft type. ‘Soft’ refers to IT systems, operating procedures or activity flows [Bitran and Pedrosa (1998)]. Hard technology such as equipment is related to the infrastructure.

• Customer interface refers to all the forms of possible contact between customers and the service organization itself, by whatever means.

As can be seen from Figure 6 architectural knowledge is only concerned with high-level information, detailed sub-system information is not obtained. Acknowledging that the notion of architecture assumes that a system can be divided into subsystems or components that interact to achieve a certain purpose, Bitran and Pedrosa (1998) state that, from a service development perspective, establishing architecture improve the development process in at least three specific ways as follows:

• At the system design stage, architectural knowledge ensures that alternatives are sought in a systematic manner.

• It eases the design process by enabling the design task to be split into sub-tasks that constitute the design of each specific component of the system.

• It facilitates a better understanding of the system as it requires the interaction between specific components to be identified and analysed.




Figure 6 Components of a service system structure

5.2. METHODOLOGY

Bitran and Pedrosa (1998) go on to discuss the process of component design, noting that it is an iterative process concerned with the refining of attributes and specifications. Each component is taken and then decomposed into subsystems in a successive manner. As the decomposition takes place, subsystem specifications are drawn up, viabilities are assessed and designs produced. This process is illustrated in Figure 7.

Figure 7 Activities of component design.

CUSTOMERS

SERVICE OFFERING

MIX OF TANGIBLES

MIX OF INTANGIBLE

INTERNAL ORGANIZATION

TECHNOLOGY

EXTERNAL ORGANIZATION

PEOPLE

FRONT-LINE EMPLOYEES

INFRASTUCTURE

SUPPORT EMPLOYEE

CUSTOMER INTERFACE


System specifications and Component specifications Detail Design

Refine Specification

Check Feasibility

Description/Blueprints of system and its components.





Shostak (1984b) uses the example of the development of a discount brokerage service to identify and discuss the phases involved in a new service development system. The development process identified was complex in nature. It was this complexity that led Johne and Storey (1996) to produce a diagrammatic representation of the process to aid clarity and understanding. The development process was seen to consist of three stages, namely first, second and final level, with each stage consisting of three or four phases. Figure 8 shows the three stages with associated phases in diagrammatic form. It can be seen upon inspection of this figure that it is at the second level stage, during the second phase definition that the detailed service description is produced, where sub-systems are identified and the relationships between them and other service systems are considered.




Figure 8. A discount brokerage example of new service development.

Edvardsson and Olsson (1996) take a slightly different approach to new service development. They distinguish three types of development:

• The development of the service concept. This consists of determining customer needs and specifying how the proposed service intends to satisfy them.

• The development of the service process. This relates to the set of interrelated activities that must function jointly to produce the service. In order to ensure an efficient and effective service process, particular attention should be paid to those areas of activities that are seen as problematic or vital. Shostack (1984, 1987) states that the outcome of the service development process is the set of clearly defined activities needed to generate the service.

• First level stages: 1. First phase definition – vague description of the basic service function produced.

2. First phase analysis – information gathering process (internal and external).

3. First phase synthesis – clarification of the service definition and boundaries drawn.

• Second level stages: 4. Second phase definition – detailed service description produced.

5. Second phase analysis – internal review of the service and external market research.

6. Second phase synthesis – documentation of service description & implementation plans.

• The final stages: 7. First phase implementation – operation functions put in place and tested.

8. Second phase implementation – implementation of communication strategy.

9. Market introduction – the service goes live.

10. Post-introduction audit – review of service and starting point for further development. Source: Johne and Storey (1996)




• The development of the service system. The service system consists of the service process resources required in order for the service concept to be actualised. These resources include the service company's staff, the customer, the physical/technical environment and the organizational structure [Edvardsson and Olsson (1996)].

• Edvardsson and Olsson (1996) state that during the development of the service system the required service sub-systems are identification and integrated. They point out that the system must form a whole but with the sub-systems functioning separately but also together with other sub-systems.

6. TESTING AND IMPLEMENTATION

6.1. TESTING

The output from the stages that constitute the architectural description of the product or service is a set of documents, plans, procedures or blueprints that enable the proposed product or service to go into production or operation. However, before the product or service can go into production or operation, testing is undertaken.

The testing phase for a conventional product or service traditionally involves producing prototypes for hardware or implementing pilot schemes for services [Bitran and Pedora (1998)]; these enable the supplier to investigate the performance of the new product or service before committing to full-scale production or implementation. The results of the trials and tests enable the supplier to assess whether the product or service meets its original objectives in terms of expected and required performance and function, whilst at the same time highlighting those areas where further re-design or refinement are necessary or would be of benefit.

Established methods exist for prototyping and service testing. Ulrich and Eppinger (1995) focus on product as opposed to service development. They discuss what constitutes a hardware prototype and the classification, uses and principles of prototypes. In particular, the authors discuss planning for prototypes, proposing a four-step methodology for use during a product development effort. Positive additional benefits are identified including possible reductions in costly iterations, beneficial restructuring of task dependencies and the expediting of other development steps. Wheelwright and Clark (1992) recognise the difference between the prototyping of products and services. They argue that for the testing of an intangible concept such as a service to be of significant benefit it must be undertaken under market conditions or, if this is not possible, then as close to actual market conditions as is obtainable. They recommend the use of pilot schemes for services, identifying that such schemes expose customers to the service prior to the full launch of the service. This enables customers to understand the service concept and provides the supplier with an invaluable opportunity to test the service in the market place and obtain feed-back from customers. Based on the results and feedback from the trial, modifications may be made in the service prior to its full release.

Murphy and Robison (1981) actually come up with an interesting definition of what constitutes market testing for a new service. They argue that it is a technique designed to evaluate whether a prospective user:




1. Understands the idea of the proposed service

2. Reacts favourably to it

3. Feels it offers benefits that answer unmet needs

Whilst the benefits of testing are widely acknowledged, for example, it is of benefit financially and in terms of time to correct problems in the service system prior to ‘going live’, it is still generally felt that there is a lack of testing being carried out for service systems [Johne and Storey (1996)]. This problem has been discussed by a number of authors [Davison et. al (1989), Easingwood (1986) and Mohammed-Salleh and Easingwood (1993)] and a number of explanations have been suggested, including the fear that rival companies could make use of information obtained from the tests and even copy or implement a similar service utilising the test information. As many services are not particularly new or innovative then there is usually a drive towards getting the service into the market place ahead of competition. In addition, it is often felt that there is comparatively little difference between the cost of testing and actually going live with the service. Additionally, financial losses from the failure of the service are often low compared to the cost of testing.

6.2. IMPLEMENTATION

Johne and Storey (1996) discuss the implementation stage in service development in detail, noting that it is widely considered [see for example Schneider and Bowen (1984)] to be the most critical of the development phases. They note that test marketing is recommended before the market launch of the service, the main reason being that it can highlight flaws, problems or areas of possible concern in the proposed service that may then be rectified before the formal launch. To back-up their statement, Johne and Storey refer to the research of Langeard et al. (1986) who consider test marketing as a more reliable means of assessing customer acceptance of new services than market research. Despite the undoubted benefits associated with test marketing, it is seldom employed in practice. A number of researchers [Davison et al. (1989); Easingwood (1986); Mohammed-Salleh and Easingwood (1993)] have cited reasons for this lack of testing which include the push to get the service into the market place ahead of the competition, the cost of service failure is relatively low compared to testing costs, the ease and speed by which competitors can implement copies of a service and the lack of a significant differential between testing costs and implementation costs.

Continuing to monitor the service and collate feedback after implementation of the service enables companies to quickly identify and rectify potential problems or ‘teething troubles’ [Easingwood (1986)]. The close relationship that generally builds up between customer and supplier during service development helps to ensure accurate and swift feedback after launch.

Schneider and Bowen (1984) discuss the benefits of involving staff, particularly front-line staff, in the development of new services. Front-line staffs are in a prime position to identify customer needs. Involving staff also affects commitment levels and employee job satisfaction, which in turn increases the chances of successful implementation. In cases




where customers can be considered to be ‘partial employees, they should be involved in the development process [Schneider and Bowen (1984)].

Shostack (1984b) splits implementation into three phases:

• Operations plan implementation. The operation functions are put in place and tested during the First Phase Implementation. This phase involves the drawing up of a detail plan of implementation including dates and schedules culminating in the required launch date of the service. Numerous problems, activities and issues will surface and require addressing. Operations testing should be performed so as problems in service design and operation can be highlighted and corrected quickly and economically prior to full scale implementation.

• Communication strategy implementation. This constitutes the Second Phase Implementation that occurs once the service is deemed ready to be launched into the marketplace. Many complex, often time consuming processes come into play during this phase including advertising, publicity, promotion and service evidence.

• Introduction to the Market. This is the phase when the service goes ‘live’. After going live, particularly during the early stages of introduction to the market, monitoring and feedback collection from all parts of the service is important. This should continue at least until all aspects of the service have been experienced by the customer, preferably longer. This monitoring helps to ensure that the service functions as it was designed to function. This is a necessary and worthwhile investment considering the amount of time, money and labour required to get a new service from the concept stage to implementation.

During implementation, the need for extensive testing and training has been recognised [Scheuing and Johnson (1989)]. Training should not just be confined to service personnel, customers too need to be taught how to use service innovations. Communication can play a vital role in controlling customer expectation about the new service [Scheuing and Johnson (1989), Edvardsson and Olsson (1996)].

7. SERVICE MODELLING

7.1. INTRODUCTION

The modelling of the service system is a very important stage in service development that seems to have received little attention over the years. Reasons for this include

• The lack of an appropriate methodology for services,

• The volume of detail and complexity of the proposed service,

• Time and resources required

• Fundamental differences between new product development and new service development (in particular the inability to accurately describe human behaviour).




Bitran and Pedrosa (1998) explain the role of modelling in the development of products and services and attempt to demonstrate how it can be of benefit in the design of intangible elements. They recognise that by being able to approximate the relevant behaviours of the system under development this enables designers to assess the feasibility of the proposed service solution thus ensuring that modelling plays a pivotal role in the design quality of a product or service. The authors discuss various types of models and highlight their use or possible use in service development. For example, they note that operations research models could be used in two contexts in service development: performance evaluation and optimisation. For example, in the field of service evaluation Ittig (1994) investigates the impact of having demand as a function of average waiting times in the design of the number of check-out counters at a supermarket. Sze (1984) describes a queuing model that predicts average delays in a telephone operator system. One example of optimisation can be found in the work of Bitran and Mondeschein (1995); they describe a dynamic model for determining the optimal allocation of hotel rooms. Much of this work has its origins in operational research.

Johne and Storey (1996) present a review of the literature about New Service Development. They recognise the fact that little research has been undertaken as to how to go about designing core attributes and the supporting process of delivery. They cite one exception to this, that being the work of Shostack (1981; 1984a). Shostack (1981, 1987, 1992) understood the importance of the modelling of service systems, stating that ‘ ...the first step towards rational service design is a system for visualising this phenomenon, so that services can be given proper position and weight in the context of any market entity.’ To this end Shostack (1981, 1984a, 1985) proposed two approaches: ‘Molecular Modelling’ and Service Blueprinting.

Congram and Epelman (1995) recognise the difficulty that service managers have found in adequately describing services, quoting Shostack (1992, p. 75), they comment that being able to describe a service is ‘one of the most difficult aspects of dealing with a service’. They go on to declare ‘If process excellence is fundamental to service excellence, why has service management paid so little attention to it?’ They offer as one of the main reasons for this the fact that modelling a service process is difficult and time-consuming, requiring a commitment of resources. Quite often the sheer volume of detail and complexity can be off-putting. In addition, the designer may set out to create an exhaustive model that covers every conceivable situation and possibility; this may not be achievable or even desirable. Shostack (1992, p. 89) realized what is involved in the modelling of service systems, stating, “The work necessary to adequately describe a service system should not be underestimated”.

The fundamental differences between new product development and new service development have also been cited as major reasons as to the lack of effort in the area of service modelling [Bitran and Pedrosa (1998), Johne and Storey (1996)]. This is readily apparent when considering the creation of models in service design compared with the creation of models used to describe the physical behaviour of hardware systems. A major difference is that with service modelling, human behaviour is an important factor that must be taken into account. One of the main problems in the modelling of service




systems is the inability to accurately describe human behaviour which is inherently difficult to predict as it does not follow defined laws of behaviour like the physical behaviour of hardware systems. Whilst Bitran and Pedrosa (1998) accept the difficulty in predicting human behaviour, they suggest that there are at least partially common human behavioural patterns that can be described and therefore incorporated into models. The authors review several techniques and principles [Maister (1985), Taylor (1994), Donovan and Rossiter (1994), Wener (1985), Guseman (1981)] that they feel can be utilised in the modelling of human behavioural elements in service system design, representing possible psychological mechanisms that explain particular individual behaviours in service settings. In addition, they argue that the use of System Dynamics models [Pue (1996)] enables service system designers to build into their systems mechanisms that minimize undesirable effects or maximise desirable effects particularly as perceived by the customer. Congram and Epelman (1995) also cite the lack of an appropriate methodology for services as being an additional reason as to the lack of service modelling.

7.2. STATIC MODELS

A thorough review of research into service design past and present reveals three main approaches have been utilised for the purpose of the modelling of service support systems in service design, namely:

• Molecular Modelling (Shostack 1981, 1984a, 1985);

• Service Blueprinting (Shostack 1981, 1984a, 1985);

• Structured Design and Analysis Technique or SADT [Congram and Epelman (1995)].

These techniques are described and discussed in detail in the following three sections.

7.3. MOLECULAR MODELLING APPROACH

7.3.1. DESCRIPTION

The molecular modelling approach described by Shostack (1981, 1984a, 1985) views product/service combinations as atoms or entities connected in a unique molecular configuration; this enables the manner in which tangible and intangible elements are incorporated into the final offer to be seen. The approach is flexible and utilises symbols to denote the key product and service elements of the entity; these are the primary elements which will be purchased and/or used by the consumer. The relationships (bonds) between elements can be visualised and their order established (see Figure 9). The approach can be utilised to obtain a comparative scale of dominance which arranges entities according to their overall makeup. Service evidence, evidence that plays the crucial role of verifying either the existence or completion of a service, can also be included in the molecular modelling approach. This evidence may be peripheral, that is possessed as part of the purchase, but




of little worth independently, or, essential, not possessed by the customer but still having a dominant impact on service purchase.

The molecular modelling approach:

• Allows full consideration of the service elements and the product elements.

• Provides a structure for identifying and visualising all parts of any complex market entity.

• Gives an indication of how the system will behave or react when any change or rearrangement occurs in the system.

Figure 9 shows two entities that illustrate the principle of molecular modelling. This figure shows the most important elements. Note that within each entity a number of sub-products and sub-services may exist. In keeping with the hypothesis of molecular modelling, if one element changes or the order, the entity changes. For example, if transportation is removed from the automobile entity, it is clear that a non functioning object is being marketed. An antique car for display only, might be such an object. Conversely, removing the product elements from this model might yield a pure transportation service such as parcel post.

Figure 9 Basic molecular modelling.

Vehicle Options and extras

Trans-Port

Rides Games Show

First Aid/ Sanitary

Prizes and Souvenirs

Snacks

Preparation AUTOMOBILE AMUSEMENT PARK

Diagram illustrating placement of Essential evidence

Transport

AUTO RENTAL

KEY: SERVICE ELEMENT

PRODUCT ELEMENT

BOND

ESSENTIAL EVIDENCE

Source: Shostack

Vehicle




7.3.2. EXAMPLES

Figure 10 illustrates the structure of a completed molecular model where the product and service elements have been identified, the bonds between the elements have been described and the tangible and in-tangible items distinguished. The remaining elements are shown ringing the entity reflecting their relationship to the entity and the order in which they should be dealt with. Shostack (1984) comments that:

• The marketer must consider the entity’s distribution system. Service elements can be difficult to distribute since service uniformity is difficult to create and maintain.

• The marketer must consider the entity’s cost and set a proper price. Service elements present a problem. Services ‘raw materials’ are often dominated by time which, unless the service is carefully designed, can be difficult to measure or control.

• The marketer must consider the advertising and promotion of the entity.

Figure 10. Components of a completed molecular model.

Distribution Strategy

Product elements

Identification of Tangibles and in-tangibles

Price Strategy

Image of Entity Advertising/Promotion

Service elements

Distribution System

Source: Shostack (1984)

Bonds: can be used to signify decision process etc




As a simple example Figure 11 illustrates a corner shoeshine concern to which the principles of the molecular modelling approach have been applied. The following attributes apply in this case:

• The service element: shoeshine.

• Product element: wax.

• Distribution: corner of the sidewalk.

• Image: convenient, fast and inexpensive.

• Price: 50 pence.

Figure 11 Molecular model for a shoeshine shop.

Wax Shoeshine

Sidewalk

Price: 50 Pence

Image: Convenient,Fast, Inexpensive

Source: Shostack (1984)




7.4. SERVICE BLUEPRINT APPROACH

7.4.1. INTRODUCTION

The service blueprint approach developed by Shostack (1981, 1984a, 1985) is an approach that attempts to map the structure of a service in an objective and explicit manner while also capturing all the essential functions to which marketing applies. Arguing that since services are fundamentally processes, Shostack (1981, 1984a,b) bases the service blueprinting methodology on systems that have been developed to deal with processes, namely time/motion or methods engineering, PERT/project programming and computer systems and software design.

Shostack (1981) identifies the basic requirements of a service blueprint as being:

• It must show time dimensions in diagrammatic form, as does the Project Evaluation and Review Technique (PERT charting); The PERT Chart is used for project scheduling as opposed to process description. A PERT Chart shows time dimensions and costs for each part of the project and shows the minimum time needed to complete a project. PERT Charts are typically used in conducting cost/time trade-off analyses.

• It must identify all main functions and sub-functions of the service, as methods engineering does. If these functions are performed by people, a work chart should be constructed. All inputs and outputs of functions must be shown. Like systems design, the blueprint must identify and handle errors, bottlenecks, recycling steps, etc.

• It must define the tolerance of the model. i.e. the permissible variation from the blueprint’s standards that can be allowed in executions without affecting the consumer’s perception of overall quality and timeliness.

The actual process of designing a blueprint involves the consideration of several issues (Shostack 1984a) including identifying the processes that constitute the service, isolating the points in the system where failure may occur, establishing time frames including standard execution times and deviations, and analysing profitability which involves establishing a time-of-service execution standard that precludes unprofitable business and maintains productivity.

The potential benefits of service blueprinting are:

• it provides a visual and quantitative description of any service element;

• it allows a service to be created on paper;

• it allows the marketer to know exactly what is being tested e.g. deviation tolerances, fail points, consumer values associated with specific functions etc. (this in turn facilitates the following point);




• it can be used to mock up a prototype or pilot service that can provide the marketer with concrete actionable feedback that can be used to modify the service.

Lovelock (1984) adds a note of warning about service blueprints, stating that in many cases they can fail due to the fact that operational efficiency can dominate over the concerns of the customer. The solution recommended by Lovelock is to produce two sets of blueprints; one from the company’s perspective and a second one from the customer’s point of view. In addition, Johne and Storey (1996) point out that the actual service will deviate from the blueprint in terms of duration, quality and customer satisfaction. This is because service development does not result in the production of the service itself, rather it produces what has been termed the service “pre-requisites” [Edvardsson and Olsson (1996)]. The actual service offer is only produced when the customer interacts with these pre-requisites.

7.4.2. EXAMPLES

7.4.2.1. SHOESHINE SERVICE

Figure 12 shows a blueprint for the relatively simple example of a shoeshine service. From this figure the following blueprint features can be gleaned for this specific case:

• The four rectangular blocks located in the upper part of the diagram represent the four main process steps that have been identified in the shoeshine service. Note, time proceeds from left to right in the diagram. The four steps identified are: brush shoes, apply polish, buff and collect payment.

• One possible failure point is shown by the blueprint, occurring if the wrong colour of wax is applied. The recovery process of re-cycling is shown as the way of rectifying the problem.

• The ‘line of visibility’ shown separates those parts of the service that are visible to the customer from those which are not.

• Execution times and tolerances are shown. The information displayed in the blueprint can aid the supplier to a large extent in setting service standards and tolerances. The blueprint illustrated in Figure 12 has a model execution time of two minutes, and the deviation tolerance is shown at three minutes or three additional minutes, consequently beyond five minutes the consumer will start to show signs of dissatisfaction and begin to question the quality of the service. The total tolerance is divided into two categories:

1. Inter-cycle deviation tolerance that occurs within the service process itself. This occurs if any of the steps in the service take longer to perform than the time specified in the blueprint.

2. Extra-cycle deviation tolerance occurs outside the service process, e.g. waiting two minutes in the queue to be served.

Both types of deviation tolerance affect customers’ perception but usually inter-cycle deviation affects profitability.




Figure 12. Blueprint for shoeshine shop.

7.4.2.1.1 PROFIT ANALYSIS OF THE BLUEPRINT Table 3 shows the profit analysis for the service blueprint corresponding to Figure 12. This table illustrates the total inter-cycle execution considering for this example two, three and four minutes. With the price of the service set to be 50 pence, costs will include a) time (9 pence per time unit considered), b) wax and c) others such as brush, cloth, etc, and pre-tax profit. The total cost is the sum of these costs

From a profit analysis of the blueprint it can be concluded:

Within the service cycle, an application of wrong wax or spending too much time on any activity can reduce pre-tax profit by half or more.

It is clear that for the 4 minutes total inter-cycle execution the service loses money even if the customer tolerates up to five minutes total execution time, consequently relaxing productivity to the customer’s level of tolerance can be prejudicial for the profitability of the service.

Shostack (1984) points out that:

Facilitating Services & Products

Standard Execution Time: 2 Minutes

Deviation Tolerance: 3 Minutes

Total Acceptable Execution: 5 Minutes

45 Sec

Standard Execution Times

Wrong Colour Wax

2. Apply Polish

1. Brush Shoes

30 Sec. 30 Sec.

3. Buff

45 Sec. 15 Sec.

4. Collect Payment

Fail Point F1. Clean

shoes

Facilitating Products

Materials (e.g. Polish & Cloth)

Select & Purchase Supplies

Line of Visibility

Not directly seen by the customer, but necessary for performance of service

Inter-cycle tolerance=1 minute

Extra-cycle tolerance=2 minuteSource: Shostack




When the marketer sets service standards and tolerances as shown in this example it will enable performance to be measured and provide a basis for managing uniformity, quality and for rational distribution of the process.

Total Inter-Cycle Execution

2 Minutes 3 Minutes 4 Minutes Price

50p 50p 50p

Costs: 1. Time @ 9 pence per minute

18p

27p

36p

2. Wax

5p 5-7p 5-7p

3. Other (brush, cloth etc. )

7p 7-8p 7-8p

Total Costs

30p 39-42p 48-51p

Pre-tax Profit

20p 8-11p 2-(1)p

Table 3. Profit analysis for the service shoeshine shop. Source: Shostack (1984)

7.4.2.2. DISCOUNT BROKERAGE

Figure 13 shows a condensed version of the blueprint of a discount brokerage created by Shostack (1984b). This blueprint was developed by applying:

• The different stages of the service design methodology discussed in section 5

• Following the basic requirements of a service blueprint.

The design and development of the discount brokerage service took over half a year and the service was introduced to the market in June 1983. Over the subsequent six months a complex cycle was observed, with numerous iterative steps leading to the final form and functionality of the service. Figure 13 illustrates only the major fail points of the service. These are the areas most likely to cause constant problems. For example, telephone communication is difficult to control and is one of most powerful and particular to customer perception. Execution time standards are also illustrated in the blueprint, these times represent the main time targets for the service.

Shostack’s (1984b) study of real services led the author to conclude that:




• The process of design and developing a service is extremely complex.

• The process is iterative and largely definitional. The objective of service design is to establish a totally specific and rational definition of the process. Through iteration decisions are made that make the profile more and more specific, until all the means for creating the service have been defined.

• A great deal of the process is verbal and word bound. As the project progress, an expanding circle of people become involved. This process and the dialogue that accompanies it have the effect of building successive and more refined mental portraits.

• Every service is unique. The design process itself shows that it is so complex; the probabilities of any two services arriving at precisely the same design are virtually nil.

• Whether the process is fully documented or not, good services design seems to require that all stages of the design process have to be completed.




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7.5. STRUCTURED ANALYSIS AND DESIGN TECHNOQUE (SADT)

7.5.1. INTRODUCTION

Douglas T. Ross invented the Structured Analysis and Design Technique (SADT) or as it is also known, Integrated Definition (IDEF which is the base in this technique). SADT describes activities as graphic languages for blue printing systems. The methodology was developed by Ross and his colleagues during the 1960’s and early 1970s to describe complex systems. In 1973 SADT was introduced into the market and since its introduction it has been utilised in diverse industries such as aerospace, telecommunications, and software development. Examples of the application of this technique can be seen in the model that Guinet (1990) utilised for a foundry production system. Another example can be found in the work of Marca and McGowan (1988) who applied SADT to the description of a training system for the US Army.

Congram and Epelman (1995) state that SADT is especially effective for services, giving the following reasons

SADT focuses on activities, the building blocks of services. SADT models can help employees at every level to understand what happens in delivering a service.

SADT is the only methodology that structurally provides for such important attributes of service description as:

• who or what performs the activity (“mechanisms” in SADT terms ); and

• what guides or limits the activity (“controls”).

SADT is valuable in improving internal communication because the model-building process includes a protocol to involve employees, other people who perform activities, management, and customers.

Congram and Epelman (1995) point out that existing service modelling approaches tend to be flow-diagram in their approach [Shostack (1981, 1984a, 1985), Kingman-Brundage (1988)] and do not form a disciplined enough process for describing services. Building on the work of Gummesson (1993), Congram and Epelman (1995) identify eight qualities that a modelling methodology must have in order to be effective, those being:

1. the graphic representation of the model must be comprehensible to employees; 2. the methodology must have a language that is clear and consistent; 3. the model must be activity based and action oriented; 4. management must support the use of the methodology; 5. employees must participate in the model development process to leverage their

experiences with the process and to involve them in process improvement efforts; 6. the model must help service employees become more effective in handling their

responsibilities; 7. the modelling methodology would ideally guide service management to process-

control efforts; 8. the methodology must foster collaboration between the operations, marketing and

human resource functions.




The authors then propose a top-down methodology that satisfies the eight criteria above. The basic concepts of the approach are demonstrated through the use of SADT. In terms of services, SADT has to-date been primarily used to model back-office operations. The SADT modelling process results in a set of interrelated diagrams that collectively describe a system. The top diagram summarizes the diagrams below, which are arranged hierarchically and become increasingly more detailed at every successive level. Real-life examples are taken and the eight criteria stated above are used to evaluate SADT as a suitable tool for service modelling. The authors identify the limitations of SADT in modelling services, that being that it is a methodology within a static modelling paradigm that can deal with the representation of the structure of a system but cannot deal with the system behaviour over time. They point out that SADT is not a simulation tool but nevertheless it can help in the preparation for simulation. They conclude that it is a useful method that brings discipline to service system modelling that can help to provide a methodology for reaching organizational consensus about service processes

7.5.2. APPLICATION

7.5.2.1. INDIVIDUAL TAX RETURN

The general structure of SADT is illustrated in Figure 14, where the sequential process is that under control and input is transformed into output by the mechanism. In order to illustrate the application of SADT Congram and Elpeman (1995) used individual tax return processing as an example. The description starts with a simple diagram (Figure 15) that summarizes the general activity, and where

• The activity box: a verb or phrase in this example, ‘process individual tax return’.

• Input: tells us the client's current tax information and the client’s file for the firm’s internal use.

• Output: refers to completed tax returns, filing instructions and updated client’s files.

• Control arrows: these refer to information that directs what activities do, as well as constraints that limit activities. For this example, the firm's policies and standard operating procedures and tax regulations are indicated by control arrows,

The mechanism arrows, which represent the physical elements (e.g. employees, customers, machinery) through which things get done, indicate that the activity will be performed by the firm’s personnel using software and the library and other resources.

The aim of this diagram is to identify the sequence of activities to be implemented and their interrelationships to ensure the smooth flow of work and the timely and accurate processing of an individual’s tax returns.




Figure 14 Schematic representation of the SADT structure activity box.

Figure 15 Diagram for processing individual tax return.

ACTIVITY Input Output

Control

Mechanism

Process individual tax return

Firm’s personnel

Client file

Firm’s policies and standard operating procedure

Client’s current tax information

Software

Library and other resources

Tax regulations.

Updated client file

Completed tax return and filling instruction

Source: Congram and Epelman (1995)




Figure 16 illustrates the decomposition of the top level of ‘’process individual tax return’ (see figure 15) into its four components

• Manage processing

• Prepare draft

• Review draft

• Copy and sign final return.

Each of the four activities comprising the activity ‘process individual tax return’ may be decomposed into a more detailed set of activities. From the analysis of the activity box ‘Manage processing’ (Figure 16), it can be seen that it has three input arrows. The first, ‘Client’s current tax information’, and the second, ‘Client file’ (retrieved from the firm’s internal files), will be merged by the activity ‘Manage processing’ into ‘Client file with current information’, which will be an input to the second activity, ‘Prepare draft’. The third input arrow indicates that ‘Client file with tax return and copies’, output from the fourth box, will be transformed into ‘Completed tax return and filing instructions and updated client file’.

The mechanism arrow at the bottom of the box shows that the manager and administrator are the firm’s personnel who will perform the activity.

The control arrows at the top of the diagram indicate that the activities will be guided by the firm’s policies, standard operating procedures and stage completion indicator, a control showing that an activity is complete.

For the remaining three boxes ‘Prepare draft’, ‘Review draft’ and Copy and sign final return’ a similar analysis can be done.




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8. CONCLUSIONS AND RECOMMENDATIONS

8.1. CONCLUSIONS

Service and hardware design processes are similar in nature.

The design process consists of a linear sequence of activities involving requirements capture, concept generation, detailed design and testing and implementation.

Therefore it is recommended that the following design process be used for services:

• Concept development

• System design

• Test and implementation

Only a limited amount of testing is currently being carried out for service systems and this has been attributed to a number of factors including the fear of the leaking of test information to rival companies, the increased demand to implement the service before competitors and the feeling that implementation costs are often broadly similar to those of testing.

The modelling of services is an area of research that has received little attention in recent years due to the fact that an appropriate methodology has not been developed that can adequately describe service components and their interactions which are inherently complex involving human behaviour.

Existing service models tend to be flow-diagram in nature.

The three basic approaches to service modelling are exclusively static in nature and do not take into account human behaviour.

8.2. RECOMMENDATIONS FOR FUTHER WORK

It is recommended that the following methods be used for further work on service design and modelling:

• Service blueprint to describe the static model (illustrates failure points)

• IDEF0 to give a graphical representation of the system (checks for compatibility)

• System modelling to be investigated further to study the dynamic behaviour of the service system.

The system modelling is proposed to be tested on a service system IDEF0 model that is being created at Volvo Aero but concluded to be applicable for most aero engine service systems. It is recommended that this modelling is performed on this selected service system. Computer software for the modelling is not yet defined but currently there are tests ongoing to see if Mat lab with State flow might work. The benefit with Mat lab and State flow is that this software is already in use in industry but for other applications. However this will be further investigated during the next phase of the work.




The service system modelling work is an important input into the 7 day business proposal work in task 2.1.3 and may assist in significantly speeding up the service design and costing process.

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STATE OF THE ART IN SERVICE DESIGN AND MODELLING

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