New Service Development: Initiation Strategies


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New Service Development: Initiation Strategies

  1. 1. New Service Development: Initiation Strategies David Kelly and Chris Storey City University Business School, London,UK Jacqueline Owen
  2. 2. Objective <ul><li>This study was done using a survey of marketing managers in UK service companies “to investigate how and to what extent service firms plan their search for new services.” </li></ul><ul><li>What’s the general approach towards New Service Development (NSD)? </li></ul><ul><li>What strategies are used in choosing new service projects? </li></ul><ul><li>Data were collected in the area of NSD strategy, idea generation, and screening </li></ul>
  3. 3. Initiation Strategies <ul><li>“These are methods and approaches service firms adopt in generating and screening ideas for new services” </li></ul><ul><li>Firms must be innovative because of the competition; but can’t do a “quick fix” </li></ul><ul><li>Proper order: strategy, idea generation, screening </li></ul>
  4. 4. Idea Generation <ul><li>Ideas for new service products </li></ul><ul><li>Where the development process starts </li></ul><ul><li>Internal or external (employees, customers, competitors) </li></ul><ul><li>Formal or informal, etc. </li></ul><ul><li>Requires close management attention </li></ul><ul><li>Continuous </li></ul><ul><li>Embraces the whole firm (Vandermerwe, 1987) </li></ul>
  5. 5. Previous Research <ul><li>“ Successful firms establish systems and procedures for stimulating idea generation on a long-term basis” (Robinson and Stern, 1997) </li></ul><ul><li>Firms tend not to engage in formal idea generation (Easingwood, 1986) </li></ul><ul><li>Idea generation must be continuous in the development process, with close management attention (Moore, 1987) </li></ul><ul><li>Must be ongoing (Crawford, 1994) </li></ul>
  6. 6. Previous Research <ul><li>Employees are important in winning new product ideas (McGuire, 1973) </li></ul><ul><li>New service ideas from employees should be rewarded (Bowers, 1989) </li></ul><ul><li>However, lack of formal NSD processes could be why operations personnel don’t contribute ideas (Easingwood, 1986) </li></ul><ul><li>Competitors – more important source of ideas than customers (Easingwood, 1986) </li></ul>
  7. 7. Screening <ul><li>“To allocate resources between those projects which have the most likelihood of helping the firm meet its objectives” </li></ul><ul><li>Single or multi-stage procedure </li></ul><ul><li>Uses quantitative or qualitative criteria </li></ul><ul><li>Involves a high degree of uncertainty and subjectivity </li></ul><ul><li>Most service firms use informal procedures (Easingwood, 1986; Edgett, 1993) </li></ul>
  8. 8. Methodology <ul><li>Survey of executives in leading UK service firms, across five different sectors: banking, telecommunications, insurance, transportation, media </li></ul><ul><li>Questionnaire survey followed by interviews </li></ul><ul><li>43 responded out of a sample of 154; 28% response rate </li></ul><ul><li>Questions regarded their firm’s NSD strategy and its approach to the generation and screening of “new products” (core products that are new-to-the-world or to the company, improvements over existing products, or supplementary and value-added services) </li></ul>
  9. 9. Methodology, Cont. <ul><li>Majority of the respondents were from marketing functions </li></ul><ul><li>Banking was the largest sector </li></ul><ul><li>Consumer and B2B </li></ul>Table 1
  10. 10. Methodology, Cont. <ul><li>Respondents were asked to categorize themselves according to the Miles and Snow (1978) typology ( a comprehensive typology for understanding organizational strategy): </li></ul><ul><ul><li>Prospector – seek to innovate, take risks, seek out new opportunities and grow </li></ul></ul><ul><ul><li>Analyzer – seldom first to market, but a fast follower; want to innovate, but desire some stability </li></ul></ul><ul><ul><li>Defender – opposite of the prospector; desire stability; want to produce reliable, high-quality products </li></ul></ul><ul><ul><li>Reactor – responds to product & market changes only when forced by environmental pressures; doesn’t have a strategy </li></ul></ul>
  11. 11. Results <ul><li>The majority are prospectors or analyzers </li></ul>
  12. 12. Number of new services introduced <ul><li>The importance of new products is recognized by these organizations </li></ul>
  13. 13. Performance of NSD <ul><li>The contribution new services make to total revenues </li></ul><ul><li>Highest for Prospectors & Analyzers </li></ul>
  14. 14. Firm’s approach to NSD <ul><li>Only half of the sample possesses a formal NSD strategy </li></ul><ul><li>Analyzers more likely to have one </li></ul>
  15. 15. Barriers to NSD
  16. 16. Approaches to idea generation & screening <ul><li>Generating ideas “on demand”: </li></ul><ul><ul><li>Fails to develop an innovative culture </li></ul></ul><ul><ul><li>Gives employees the notion that their ideas may be ignored </li></ul></ul><ul><ul><li>Employees are impor- </li></ul></ul><ul><ul><li>tant source for new </li></ul></ul><ul><ul><li>ideas </li></ul></ul>
  17. 17. Satisfaction with approach to NSD <ul><li>The importance of a strategy: firms with a formal NSD strategy are more satisfied </li></ul>
  18. 18. Conclusion <ul><li>NSD initiation strategies are largely informal processes; therefore, firms miss out on opportunities in the marketplace </li></ul><ul><li>Few firms involve staff in the process; therefore, difficulty may arise when launching new services </li></ul><ul><li>Service firms with formal strategies are more satisfied; therefore, more firms need to adopt structured NSD approaches </li></ul>
  19. 19. Management Implications <ul><li>There are great benefits in being an active developer of new services: “over 40% of the revenues of Prospectors & Analyzers are received from the sales of new services released in the previous three years” </li></ul><ul><li>Only 25% of firms search for ideas on a continual basis; “successful firms establish systems & procedures for stimulating idea generation on a long-term basis” </li></ul>
  20. 20. Management Implications <ul><li>“ It is vital that NSD expertise is seen as an important skill within the organization; managers should involve proactive hiring policies and knowledge of current staff must be carried over to the subsequent projects” </li></ul><ul><li>There is an “urgent need for the development of systems & processes that stimulate idea generation activity” </li></ul><ul><li>Don’t spread resources too thinly & across too many projects; “lack of resources is a common barrier” </li></ul>
  21. 21. Management Implications <ul><li>“The presence of a detailed & formal NSD process has been found to be a key success factor in NSD performance” (de Brentani, 1991) </li></ul>