The Impact of Internal Communication and Collaboration between Operations and Marketing on New Service Development

Article excerpt

Intense competition in the service industry has led service firms to develop an increasing stream of new service products, of which, the life cycles are becoming much shorter than ever. This recent change in the service business environment has required operations and marketing functions to be integrated more closely. Creation of the integrated and collaborative interface between these two functions has been reported as a challenging task, nevertheless is crucial to a firm's performance. Therefore, this research empirically studied the impact of communication and collaboration between operations and marketing on new service product development and potentially, better business performance.

INTRODUCTION

In recent years, service industries have been growing more significantly than ever because 81.8% of the U.S. workforce in 2008 were in services, compared to 50% in 1955 (Collier and Evans, 2008). New service/goods product development is at the heart of most business strategies and marketing plans among others. It is hard to conceive a successful corporation where a new product, service, or process is absent from its business approach (de AssunÇão, 2008). When firms are fiercely competing on price and functionality, design is one of the few differentiators that matters (Gibney and Luscombe, 2000). Hence, studies that attempt to reveal more formalized new service development (NSD) processes have recently increased to think afresh about such crucial business tasks (Ozdemir et al. 2007). The NSD is a process of developing new service offerings to achieve higher customer satisfaction, build reputation for being innovative, lead the market, and finally gain more market share and profits. It is rather similar to new product development (NPD) in manufacturing industries, which has had much attention from research professionals. However, the innovation and management literature indicates that the development of a service product is different from the development of a tangible product due to service's unique characteristics of intangibility, heterogeneity and simultaneity (Kelly and Storey, 2000; Hipp and Grupp, 2005; Nijssen et al., 2006). Nijssen et al. (2006) especially explored the similarities and differences of NPD and NSD through an empirical study tested in the Netherlands using a semi-governmental agency's panel of small- and medium-sized service and product firms. They pointed out that the drivers of innovation for NPD and NSD may be the same, but that the relative importance of these drivers may be different and suggested that more work is needed to understand the mechanisms underlying the differences and similarities of NPD and NSD. Thus, it is worthwhile to see if the findings on the effects of close interface between operations and marketing (O/M) on new product development (NPD) still holds true in the service industry.

The success of a newly-designed service is heavily dependent upon a customer's perception of the service as well as the service delivery system. This includes the operations personnel, who interact with the customers during the service, technology, service facilities, etc. In this point of view, service operations personnel can contribute to the success of new service offering in two folds: (1) their knowledge about customer's wants and needs that can be incorporated into the new service during the NSD processes, and (2) their direct interaction with customers which instantly affects customer satisfaction with the service. Therefore, the close communication and collaboration between O/M personnel during new service development processes is very critical to the success of new service offerings. Despite the significance of integrated and collaborative interface between O/M functions, these two functions usually have different perspectives and priorities that become a barrier to achieving corporate-wide goals.

Operations departments focus on reducing costs through efficiencies in the service supply chain system, while marketing emphasizes higher revenue, more service product variety, and meeting customer needs from well-stocked inventory pools (Laseter et al. …