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New Service Development: Initiation Strategies

New Service Development: Initiation Strategies






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    New Service Development: Initiation Strategies New Service Development: Initiation Strategies Presentation Transcript

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