Magazine article Management Review

The Ten Commandments of New Service Development

Magazine article Management Review

The Ten Commandments of New Service Development

Article excerpt

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In recent years, the United States economy increasingly has become service oriented. But while we continue to examine and refine the science of new product development, there is little information available to help managers develop and launch successful new services.

Today's renewed focus on internal innovation is real. For example, First National Bank of Chicago recently established a goal that internally developed new services launched over the next three years must account for at least 20 percent of total revenues in 1995. Similarly, International Business Machines Inc. challenged its services managers to develop new services that will enhance the company's quality image during the next several years.

The push for innovation by senior management underscores the demand by customers to be rewarded for their loyalty with continual quality improvement and new services. Successful service companies of the 1990s will follow the lead of companies like IBM and First Chicago and focus efforts on total customer satisfaction. But repackaging existing or competitive service offerings or responding sporadically with new offerings to changing customer needs will simply not be enough to meet this challenge.

The challenge for every organization offering services is to create a continuous stream of new services that provide revenue growth consistent with business strategies. The key tasks are to leverage significant investments in operations and technology, and to obsolete unneeded services all ahead of the competition. NEW SERVICE DEVELOPMENT

In order to develop successful new offerings, service companies need to cultivate and utilize appropriate principles of leadership, communication and feedback. Whether these principles are derived from the top or conceived at the bottom, senior management must clearly articulate them and set them forth as axioms to guide the entire organization.

There are a number of basic "commandments" that can truly drive the new service development process toward successful results. Based on our in-depth discussions with scores of service organizations around the country, and the results of our recent survey, Winning New Product and Service Practices of the 1990s," the following "10 commandments" should form the guideposts for an effective new service development process.

I. Thou shalt know and define thy service offerings.

Many service organizations are hard pressed to clearly define their service offerings. By defining the functionality of a new service offering, management will be better able to prioritize resource needs and build a portfolio of services that support the business strategies. Services can be broken into four major groupings, according to their functionality. These groupings include consulting (advise, perform), support (maintenance agreements, room service), operational (cash management, telecommunications network, credit cards) and physical services (movers, amusement parks, hotel rooms). Consulting and support services generally require a focus on people and processes. The other two require significant investments in systems and physical structures.

II. Thou shalt worship only new service strategies tied to business strategies.

Successful service companies link their new service strategies to their business strategies. Moreover, as these business strategies change, management makes a corresponding shift in its new service strategies. This linkage provides the direction or focus on what types of new services to develop, and helps define the portfolio of new service types according to their degree of "newness." New-to-the-world, new-tothe-company, concept extension, repackaging and quality improvement could all be included in a new services portfolio. The challenge, then, becomes matching new service types according to the new service strategies. For example, if a business strategy calls for a competitive response, the service strategy might change to focus on concept extensions due to time requirements. …

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