Creating new services

Chapter 10 - Creating new services

Chapter 10

Creating new services LIA PATRÍCIO AND RAYMOND P FISK

ABSTRACT This chapter explores creating new services through service design. Service innovation requires developing new ways of value co-creation between customers and service organizations to improve human well-being. Service design is essential to service innovation because it brings a service organization’s strategy and innovative service ideas to life. This chapter introduces service innovation, examines the challenges of creating new services, and synthesizes different contributions from the interdisciplinary service design field. It then presents the multilevel service design method and describes the service design process through its iterative stages of understanding the customer experience, designing the service offering and prototyping the service experience.

KEYWORDS customer experience; customer value constellation; service blueprinting; service design; service innovation; service experience prototyping; multilevel service design

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Introduction As the importance of services grows in the global economy, the need for service innovation that truly serves customer needs has risen to the forefront of research and practice priorities. Services are essential to human well-being, especially in such sectors as health care, education, finance, and governmental services. Even service sectors such as hospitality, tourism and entertainment are essential to human happiness. Truly serving customers requires that service organizations go beyond merely tinkering with efficiency improvements and refining existing service models. A more comprehensive and holistic approach to service innovation is needed that enables value co-creation for customers and the service organization (Patrício & Fisk 2011). Service design is crucial to service innovation, but several design challenges arise due to the complexity of service systems, the increasing importance of the customer experience, and the need to integrate different fields for service design. Service design is a rapidly evolving interdisciplinary field that synthesizes service science and design thinking, integrating contributions from services marketing, interaction design, operations management and information systems to design service offerings that enable customers to co-create valuable experiences. In this chapter, we discuss service innovation in the light of the new servicedominant logic (Vargo & Lusch 2004) and the challenges posed by the new service environment. Service design is an emerging field, and different approaches have been developed that need to be integrated. We synthesize the different contributions for an interdisciplinary approach to service design, involving the orchestration of different service elements such as people, processes, physical environment and technologies. We explain the service design process as humancentered and iterative. We introduce multilevel service design, an interdisciplinary method for the design of service offerings at different levels that focuses on the customer experience. We then explain the service design process, which comprises: understanding the customer experience, designing the service concept, designing the service system, designing the service encounters, and finally prototyping the service experience.

Service innovation Service innovation is the creation of new and/or improved service offerings, service processes and service business models (Ostrom et al. 2010). In this chapter, we focus on creating new service offerings that enable customers to co-create value. A new service is defined as ‘an offering not previously available to customers that results from the addition of offerings, radical changes in the service delivery process, or incremental improvements to existing service’ (Johnson et al. 2000). However, from a service logic perspective, innovative services are not defined in terms of their new features, but in terms of how they change customer thinking, participation and capabilities to create and realize 186

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value (Michel et al. 2008). From this perspective, innovative services enable customers to find new ways to fulfill their personal needs.

The case of M-Pesa M-Pesa is an innovative service created by Safaricom that has revolutionized banking in Kenya, and may spread around the globe. Of Safaricom’s 16 million subscribers, 12 million have M-Pesa accounts, in a nation of 39 million people. Safaricom started as a cell-phone company in Kenya, where the number of mobile phone subscribers has skyrocketed in the past ten years. M-Pesa means ‘mobile money’, and is a service that allows customers to easily transfer money, make payments, and save money through their mobile phone. A Safaricom subscriber takes the cash he wants to transfer to another person, along with the recipient’s mobile number, to a Safaricom agent. The agent takes the sender’s money and, for a small fee, uploads the value to his prepaid account. He then sends on the credit to the recipient’s phone account. The secret of M-Pesa’s success is simplicity. Sending money home used to require a hard-to-obtain bank account, but Kenyans can now send as little money as $1.20 to one another for minimal cost, with no risk, in just a few seconds. Safaricom has evolved by creating innovative services to support new customer patterns. One new innovation is an alliance with a brick-andmortar bank. That idea evolved from Safaricom’s observation that Kenyan’s were using M-Pesa not just as a transfer service but also as a savings bank. M-Pesa allows deposits of up to $600 per day, and many subscribers, Safaricom noted, were depositing cash and just leaving it there where it was secure. Adapted from Time Magazine, ‘Kenya’s Banking Revolution’, 31 January 2011 These service logic innovations may change the customer’s and organization’s role in value co-creation by creating smart offerings, by changing the organization’s processes of value integration, or by repositioning the organization in the value constellation. According to Verganti (2009), a radical form of designdriven innovation is to create new meanings the customer attributes to the service, thereby changing the way the customer relates to and co-creates value through the service. For example, the first mobile phones and mobile phone operators provided basic voice communication services. However, mobile phone services today comprise a rich set of offerings, including text messaging, web browsing, gaming, social networking, and a multitude of applications. Technology has played an important role in the evolution of mobile phone services, but radical innovation does not necessarily require major technological breakthroughs. This is the case of M-Pesa, an innovative mobile phone service that combines technology and ingenuity to co-create value with customers in radically new ways. 187

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The challenges of creating new services The service environment has changed significantly in the recent past. Ideally, customers should be able to smoothly co-create their experiences and perceive service offerings as simple and easy to use. However, these smooth frontstage service experiences are created through sophisticated backstage company value networks and complex service systems, which require the integration of multiple channels, people, processes and technologies. Coping with this complexity requires the integration of multiple disciplines to create new services. Customer experiences are increasingly important for differentiating and adding value to an organization’s offerings (Pine & Gilmore 1998). Customer experiences are co-created through all interactions between customers and the organization, and cannot be completely determined by the service provider (Verhoef et al. 2008, Gentile et al. 2007). For example, a dinner experience at a restaurant results from the interaction with the physical environment, the employees and the service process, but also from the interaction between other customers and the customer. In this context, organizations cannot deliver pre-produced offerings but can only offer value propositions, which customers then transform into value through use (Gupta & Vajic 2000; Normann & Ramírez 1993). Customer experiences cannot be designed, but services can be designed for the customer experience (Patrício et al. 2011).This means that services should be designed in a holistic and flexible way, enabling customers to smoothly co-create experiences across all their service encounters according to their unique preferences. Today’s service offerings are enabled by complex service systems which are configurations of people, processes, technologies, physical evidence and other resources that enable customers to co-create value (Maglio et al. 2009). For example, customers buying a house must combine service offerings from multiple organizations, including real estate, credit and insurance organizations. This network of service systems forms a customer value constellation through which customers co-create value for a given activity. Service organizations are increasingly integrated into these value networks to provide complete offerings to their customers. Each service offering in the customer value constellation is enabled by an organization’s service system. Technology trends have led to the emergence of multi-interface service systems through which service organizations manage their customer relationships (Rayport & Jaworski 2004). Designing these service systems requires defining the mix of service offerings and interfaces, the tangible evidence, the service processes, people’s roles in the processes (whether service representatives or customers), and the technology solutions that provide crucial support to the entire system. Customers co-create their service experiences by navigating the service system through a sequence of service encounters. For example, a customer co-creates a mortgage loan service experience through several interactions with the bank, such as gathering information at the bank’s website, getting advice by phone, and completing the contract at the physical branch. 188

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At each service encounter, the customer interacts with a concrete service interface, such as gathering mortgage information at the bank’s website. Service organizations need to design each of these service encounters in detail, but they also need to take into account how each service encounter contributes to the overall service experience. Creating new services requires holistic systems thinking that connects these different levels of service design. It also requires the integration of different disciplines (such as computer science, engineering, social sciences and the arts (Fisk & Grove 2008)) and the work of multidisciplinary teams. An interdisciplinary approach to service design is therefore essential to creating innovative services.

Service design Service design brings innovative service ideas to life. It ensures that service interfaces are useful, usable and desirable to the customer, and effective, efficient and distinctive to the service provider (Mager 2009). If we focus on what is designed, service design can be defined as the orchestration of clues, places, processes and interactions that together create holistic service experiences for customers, clients, employees, business partners or citizens (Ostrom et al. 2010). For example, providing health care services requires a careful design of the physical evidence, highly-trained people, a well-executed health care process, and crucial technology support. Designing service offerings in this complex environment requires the integration of service elements down through the different levels of service design (Patrício et al. 2011). At the service concept level, it requires the design of the organization’s value proposition and positioning the service offering in the customer value constellation. At the service system level, it requires the design of frontstage interactions, backstage processes and supporting technologies. At the service encounter level or ‘touchpoint’, it requires the detailed design of the interactions between customer and service provider. Service design is an emerging field, but early approaches to designing new services trace back almost 30 years. Service blueprinting (Shostack 1984) started as a process for mapping all the key activities in service delivery and production and has evolved to include other service aspects. Operations management focused on designing the service process (Hill et al. 2002), whereas service marketing focused on designing the customer experience (Berry et al. 2002) and the value proposition. The user-centered approach of interaction design focused on understanding and designing the emotional aspects of people’s interactions with objects, environment and other individuals (Meroni & Sangiorgi 2011) and made a significant contribution to the design of services, especially the ones that are technology enabled. The growth of service science (Chesbrough & Spohrer 2006) and the infusion of design thinking (Brown 2008; Martin 2009) across several disciplines have fostered the emergence of service design as an interdisciplinary field that integrates these 189

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different contributions into a holistic approach to creating new services (Kimbell 2011; Meroni & Sangiorgi 2011; Patrício & Fisk 2011). However, it is crucial to understand the contribution of each discipline and how it connects with other disciplines to create new services. The interdisciplinary service design approach is synthesized in Figure 10.1, which maps the contribution of the different fields for service design, showing how they overlap and connect for a holistic approach. Service marketing contributes the design of the service value proposition and how the organization delivers its promises across the different service encounters. Interaction design contributes the design of frontstage interactions between customer and service provider. Operations management contributes the design of the backstage service system and processes that enable service offerings to be efficiently delivered. Service engineering contributes the development of technology-enabled solutions that provide crucial support for service provision, whether frontstage or backstage. Creating new services requires integrating these different contributions to enable the work of multidisciplinary teams that orchestrate the different service elements with a creative design approach. Figure 10.1 Service design as an interdisciplinary field

Source: Authors. To create new services, it is important to understand what is designed, but also how services are designed. From this perspective, service design can be defined as a human-centered, iterative process. Service design is human-centered as it entails 190

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understanding customers, different stakeholders and their contexts, and translating this understanding into the orchestration of the different service design elements (Evenson 2008). By being human-centered, service design enhances the lives of people and helps organizations better connect with their existing networks of stakeholders, while discovering new opportunities to cocreate value (Meroni & Sangiorgi 2011). As such, the starting point of service design is the exploration of the needs, dreams and behavior of people that will participate in the service being created. This process broadens the design space and helps generating novel ideas for services and service systems. Service design is also an iterative process that passes through several stages (Brown 2008; Stickdorn & Schneider 2010) that can be labeled as: (1) exploration, (2) ideation, (3) reflection through prototyping and testing, and (4) implementation, as shown in Figure 10.2. Exploration entails studying the stakeholders who will be involved in the project, as well as their experience, behavior and context in a human-centered design approach. Ideation is the process of generating and developing new ideas that may lead to service solutions. At this stage, it is crucial to include all the main stakeholders and to work with multidisciplinary teams. Reflection entails prototyping the service concepts previously created and testing them with potential customers. Since services are intangible performances, prototyping is important so users and the design team can have a more concrete idea of the service concept. Finally, implementation entails planning, implementing and reviewing the changes necessary to operationalize the new service concept and offer it to customers. This process is iterative and may loop back more than once before the market launch occurs. Figure 10.2 Service design process

Source: Brown 2008. Understanding the customer experience necessitates collecting a rich set of data about customer aspirations, activities, contexts, artifacts used and people involved. On the other hand, designing services requires orchestrating a set of service elements down through different levels. The creative transition from understanding the customer experience to defining the service solution, from current situation to preferred future, is at the heart of service design. However, the richness of experience information and the complexity of services can make 191

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this task rather challenging. Documenting and visualizing this transition is crucial, as it supports communication among the multidisciplinary design team, enables the exploration of new service possibilities, and helps trace design decisions between the two stages of the process. Models can help bridge this gap between research results and new service concepts, as shown in Figure 10.3 with the bridge model adapted to service design from Dubberly, Evenson and Robinson (2008). The service design process starts with understanding the customer experience in the current situation (lower left quadrant), but the richness of the captured information is frequently hard to analyze and interpret. Models can help capture and systematize this customer experience information, so it becomes easier to understand and communicate among design team members (upper left quadrant). Customer experience modeling (Teixeira et al. 2012) is an approach for mapping and systematizing the customer experience to support further stages of service design. Figure 10.3 The bridge model adapted to service design

Source: Authors. Based on understanding the customer experience, new preferred service solutions are envisioned. At this stage, models provide an abstraction that helps focus on the most relevant service aspects and enable the design team members to ‘play’ as they explore and test new service solutions (upper right quadrant). After exploring new service possibilities through modeling, the design returns to the concrete world, converting models into prototypes, and finally implementing a design solution (lower right quadrant). Modeling can therefore create a visual abstraction that helps systematize complex information, discuss different 192

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interpretations, and explore future service possibilities in a flexible and inexpensive way before building more concrete service prototypes.

The multilevel service design method There are different approaches to service design and many tools available to support the service design process stages. Each approach provides an important view, but they should be integrated for a holistic and interdisciplinary service design approach. In this section, we present multilevel service design (MSD) (Patrício et al. 2011), an interdisciplinary method for the integrative design of service systems. MSD synthesizes contributions from interaction design, service science, management and engineering to build an interdisciplinary approach to service design. The MSD method enables integrated design of service offerings at three hierarchical levels with a strong focus on the customer experience: designing the organization’s service concept; designing the organization’s service system; and designing each service encounter (see Figure 10.4). Figure 10.4 General model of multilevel service design

Source: Patrício et al. 2011. The MSD process comprises four steps: 

In Step 1, an in-depth study of the customer experience is undertaken at three levels: the value constellation experience, the service experience, and the service encounter experience.

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In Step 2, based on the study of the customer experience, the customer value constellation (CVC) model enables designing the service concept. The CVC represents the set of service offerings and respective interrelationships that enable customers to co-create their value constellation experience for a given customer activity.

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In Step 3, the firm’s service system is designed through the service system architecture (SSA) and service system navigation (SSN). The SSA defines the structure of the service system, providing an integrated view of the multi-interface offering and support processes across the service experience. The SSN maps the alternative paths customers may take across different service encounters in the service experience.

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In Step 4, The MSD method uses the service experience blueprint (SEB) (Patrício et al. 2008) to design each concrete service encounter.

With this multilevel perspective, the MSD method offers a holistic view, from the service concept level, to the multi-interface service system level, and then to the service encounter level.

Exploration: Understanding the customer experience Understanding the experience of customers, and all stakeholders, is a crucial step for human-centered service design. This understanding feeds the subsequent process of ideation, reflection and implementation. Step 1 of MSD starts with an in-depth study of the customer experience, but it does so at different levels. For example, to design a new mortgage service, understanding the existing mortgage loan experience is not enough. At a higher level, designers need to understand the overall customer experience within which the mortgage loan is embedded, and at a lower level, they need to understand the customer experience at each service encounter in detail. MSD therefore starts with a study of the customer experience at three levels: value constellation experience, service experience, and service encounter experience. The broadest level is the value constellation experience, which is co-created by the interactions between the customer and all service organizations that enable a given customer activity, such as buying a house. The value constellation experience of buying a house may involve:

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searching for a house, which may be done through a real-estate broker;

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obtaining a mortgage loan, which may be provided by a bank or loan company;

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purchasing the house, which may be done with the services of a title registration firm; and

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decorating the house, which may be done with assistance from many service organizations.

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Understanding this value constellation experience provides a broader view and opens up new possibilities to innovate the mortgage service beyond the existing boundaries of the organization. The value constellation experience is the result of several service experiences with different organizations. The service experience is co-created through all interactions between a customer and an organization’s service system to accomplish a given service activity, such as a mortgage loan experience. This is the customer experience that is enabled by the organization’s service offering. This service experience comprises all the different service encounters with the organization across different service interfaces. For example, a mortgage experience is co-created through customer interactions with the bank, such as gathering information on the bank’s website, getting telephone advice, or signing the contract at a physical bank branch. Understanding this level of customer experience provides an integrated view of the customer journey across the different service encounters in different service interfaces and highlights the need to design the service system in ways that enhance the service experience as whole. The service experience is co-created through a set of service encounter experiences or touchpoints. The service encounter experience is co-created through customer interactions at a given service interface for a service task, such as gathering loan information on the bank’s website. Understanding this level of service encounter experience provides detailed information for the design of each interaction between the customer and the organization. For example, software engineers and designers need to design the bank’s internet service to enable customers to cocreate valuable experiences each time they use it to gather information. By studying the customer experience at different levels and by understanding how they are connected, each service encounter can be designed, not only to enhance that specific service encounter experience but also to enhance the service experience as whole. A vast collection of methods and techniques can be used to explore and understand the experience of customers and all stakeholders related to the service being designed. These methods share a social science background but they have different perspectives on the role customers may play in service design, as depicted in Figure 10.5. The left side of the figure describes an approach characterized by an expert mind-set (Sanders 2008). Service designers here design for customers. From this perspective, service designers should not ask customers for solutions, as they don’t know emergent trends and will only suggest incremental improvements to existing services (Ulwick 2002). For example, customers did not know they wanted a mobile phone before they had one, because they were not aware of their latent need for mobile communications and that technology could enable it. However, customers are experts in performing the activities the service is intended to support and, as such, an in-depth understanding of this experience is crucial for successful service design. This understanding can be gained by asking customers, and/or by observing their behaviors and contexts.

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Figure 10.5 Different perspective of customer involvement in service design

Source: Authors. Customer research that relies on interviews and focus groups is better suited to gathering information about explicit customer needs that they are able to verbalize. To avoid focusing on incremental improvements, Ulwick (2002) suggests outcome-based customer interviews. These outcome-based interviews focus not on what customers would like to see in the new service but on what results they want to achieve in doing their activities. The task of the design team is to create new services that enable customers to attain those desired outcomes. To discover latent customer needs and their goals and dreams, it is also important to observe customers, their activities and contexts. Ethnographic methods have been increasingly used in the organizational environment, and are one of the most commonly exploration approaches in the design for services (Cefkin 2009). Ethnographically inspired approaches recognize that actual behavior differs from how it is described by those who do it. Hence, detailed studies of the customer experience should include both observations and interviews, studying the customer experience holistically in its natural context, and producing a rich and detailed description from the point of view of the different stakeholders. The right side of Figure 10.5 describes an approach characterized by a participatory mindset. Service designers on this side design with customers. They see customers as the true experts in domains of experience such as living, learning or working (Sanders 2008). These proactive techniques of customer involvement explore the frontiers of customer needs and the role of customers as innovators. This type of customer involvement in service design is characterized by customers actually participating in the design of new services, for instance, by being a member of a project team (Edvardsson et al. 2006). These approaches provide different views of the customer experience that can be used in complementary ways. Interviews can be used to gather explicit customer experience knowledge that customers are able to verbalize. On the other hand, observation in ethnographic approaches gathers tacit knowledge about the customer experience by capturing contextual factors and customer behaviors that they are not explicitly aware of. The study of the customer experience can be complemented by involving customers in the design team, for example, by inviting them to participate in key moments of service concept design and testing. Whether a more expert or participatory perspective is adopted, creating successful 196

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new services requires a holistic understanding of the customer experience, including an in-depth study of customer goals and dreams, the activities to be supported, and their surrounding context. This understanding should also cover the different levels of the customer experience. Understanding the value constellation experience broadens the design space beyond the existing service boundaries, but a more detailed view is also necessary to enhance the customer experience across the different service encounters.

Ideation: Designing the service offering After the inspiration process, ideation represents the generative stage within the iterative process of service design and is closely related to the stage that follows – reflection. Several iterations may take place between these two stages, as ideation explores new service concepts while reflection prototypes and tests them in an iterative process. This approach allows for exploring many possible solutions before implementation takes place (Stickdorn & Schneider 2010). At this stage, modeling helps the multidisciplinary team visualize and communicate their ideas and efficiently explore a diverse set of possible design solutions. The MSD method builds upon understanding the customer experience to design the service offering, but it does so at three levels (steps 2 through 4): designing the service concept, designing the service system, and designing the service encounter. The design of the service offering is supported by different models. These models help visualize and explore new ideas and possible solutions, facilitating the communication between members of the multidisciplinary teams so that they understand the impact of different design decisions in the area they focus on. The integrated design of the different levels of the service offering also enables understanding of how strategic decisions at the service concept level impact the service system and service encounters.

Designing the service concept with the customer value constellation The service concept is the set of benefits that the service offers the customer (Edvardsson et al. 2000), including its core and supplementary services. However, organizations’ service offerings may include the benefits internally developed by the organization, but also other benefits offered through the connections and partnerships established between the organization and other members of the value constellation. For example, banks have long-established partnerships with insurance companies and registration offices to offer a more complete solution to customers buying a house with a mortgage loan. As such, in MSD, the service concept is defined as the firm’s positioning in the customer value constellation (CVC), including the benefits offered by the organization and the partnerships established (Patrício et al. 2011). The CVC can be used to depict the existing organization’s service concept, but it can also be used to explore new possible service concepts that involve repositioning the organization’s offering and/or a reconfiguration of the value constellation.

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In the case of the bank mortgage loan service concept shown in Figure 10.6, the CVC maps the set of service offerings and respective interrelationships that enable customers to co-create their value constellation experience for buying a house. Some of these services are offered by the bank (e.g. mortgage loan), and some are offered by other companies (e.g. real estate broker services). The CVC represents the existing service solution in a broader context, highlighting other offerings that customers use to co-create their house-buying experience. Figure 10.6 Bank’s service concept design in the customer value constellation

Source: Patrício & Fisk 2012. The CVC can also be used to explore innovative service concepts. By viewing mortgages as integrated within a value-creating network for buying a house, and by understanding that the process of house search and mortgage search are often done in parallel, the bank can recognize the opportunity to investigate new possibilities for service offerings which let them move beyond the boundaries of the basic mortgage service. The bank partnered with registration offices and insurance companies to facilitate the house buying process. The bank also partnered with an important local newspaper to develop an internet service that combines general real estate information, listings of homes for sale, and the mortgage information they had previously provided. The service supports individuals, real estate companies, and real estate brokers. The new service allows potential buyers to search for houses, specifying several characteristics such as location, number of rooms, or maximum price. For each information screen for a specific house, there is information about the bank’s mortgage service with a simulation that allows customers to easily input their mortgage conditions and 198

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learn the monthly amount they would pay. With this new service concept, the bank enhanced the customer experience while strengthening its strategic position.

Designing the service system with the service system architecture (SSA) and service system navigation (SSN) Based on understanding the service experience, the design of the service system operationalizes the value proposition. To offer the benefits defined in the new mortgage service concept, the bank needed to orchestrate a set of service interfaces, processes, tangible evidence, technology and people which then enables customers to co-create their desired service experiences. The MSD method uses the service system architecture (SSA) and service system navigation (SSN) to design the service system. As shown in Figure 10.7, the top row of the SSA depicts the main tasks customers perform to acquire and use a mortgage loan. The column of the SSA depicts the service interfaces (in the frontstage) and the support processes and technologies (in the backstage), which enable customers to co-create their experiences. The body of the matrix shows the service interfaces and backstage activities that support each customer service task. Each cell depicts a service task performed in a given service interface, which represents a service encounter or touchpoint. The sequence of touchpoints across the different tasks and service interfaces forms the customer journey. Figure 10.7 Service system architecture for the mortgage loan service

Source: Patrício et al. 2011. 199

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With this matrix view of the SSA, the design team can map different customer journeys, which form the service system navigation (SSN), and can then analyze their implications in terms of backstage processes and technologies. In the case of mortgage loans, the study of the customer experience showed that some customers preferred to conduct their customer journey online. However, the existing service system did not allow it because there was no online advice and the contract had to be signed in the physical bank branch. Based on the work of the multidisciplinary team, telephone advice was added, but due to legal constraints the contract formalization had to be performed in the physical branch. On the other hand, a smooth service experience across different stages and interfaces required the integration of legacy information systems for an integrated view of the customer. The visualization of the interconnections between the customer journey and the backstage processes and technologies, therefore, enabled a clearer understanding of service system design possibilities by all members of the multidisciplinary team.

Designing the service encounter through the service experience blueprint Service encounters are defined as the moments of interaction between the customer and the firm and may take place in multiple interfaces, such as the Internet or a physical store (Bitner et al. 2000). Service encounters are also called touchpoints in the service design field (Zomerdijk & Voss 2009). At this level, service designers need to define the interaction setting, interaction process and the role of each participant. Figure 10.8 Service experience blueprint for gathering mortgage loan information at the bank’s internet service

Source: Patrício et al. 2008.

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The MSD method uses the service experience blueprint (SEB) diagram (Patrício et al. 2008) to design each concrete service encounter, e.g. loan information gathering on the internet (see Figure 10.8). Based on the detailed understanding of the service encounter experience, the SEB maps the actions of the different participants in the service encounter, both frontstage and backstage. The SEB diagram depicts lines of interaction, lines of visibility, fail points, waiting points, and service interface links. The service interface link represents a point in the service encounter where the customer should be guided to another interface to enhance the service experience. Again, SEB is used to map the existing service encounter, but it is also used to explore other design alternatives that may enhance the service encounter experience. For example, when customers gather mortgage information on the internet, this service can explicitly offer the option to receive advice from other service interfaces. SEB offers a detailed view that enables designing the concrete service interface without losing the multi-interface perspective.

Reflection: Service experience prototyping After the design of the service offering, the concepts and ideas generated can be tested through prototyping, in an iterative process of testing, improving and retesting. Prototyping is a flexible approach to bringing service ideas to life and integrating all the pieces of design in a holistic unit so that customers and other stakeholders can understand how the service will look and can see if it works (Saffer 2010). Service prototyping is therefore a crucial activity in service design to visualize and enact intangible service ideas and concepts in a holistic view, helping to communicate, test and improve them. Prototyping is a well-established procedure in both product and interaction design. However, applying prototyping techniques to designing services requires distinctive methods that address the different elements of service design (Katz 2011; Saffer 2010). Service experience prototyping requires testing the role of people, process and physical evidence (Sarmento and Patrício 2011): 

People: Role-playing constitutes an important element of service prototyping, and can help us understand how customers, other customers, service employees and stakeholders co-create the service. Through enactments, designers and other participants can understand how the service will look and feel, as well as the role the different stakeholders play in co-creating the service experience.

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Process: Prototyping the service interaction process involves enacting the multiple touchpoints of the customer journey. Service prototyping can make use of a script, or the enactments can simply be improvised. The players act their way through the service experience to demonstrate how the service process works so it can be improved.

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Physical evidence: Prototyping the physical environment and the artifacts with which the customer and other stakeholders interact is important for ‘tangibilizing’ the service offering. The service prototype can be tested 201

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within a mock-up of the environment and the prototypes of the objects so that participants can experience the flow and feeling of the service. Environments can be simulated using giant foam blocks for objects, putting masking tape on the floor to block out areas, and projecting images on the walls (Saffer 2010). In more sophisticated service labs, such as Fraunhofer’s (www.dlpm.iao.fraunhofer.de/en/servlab/) ServLab in Germany, virtual reality can also be used to prototype different kinds of new service environments. Figure 10.9 Storyboard of mobile service experience prototyping

Source: Sarmento & Patrício 2011. Service prototyping is essential to testing the service experience. Experience prototyping is any kind of representation, in any medium, that is used to (re)live or convey an experience with a product or service (Buchenau & Suri 2000). Experience prototyping can be used in ways that are more passive, such as creating a video or a storyboard of a service experience for the customers and other stakeholders to watch. Figure 10.9 shows a storyboard of a mobile service experience prototyping. However, for Buchenau and Suri, experience prototyping includes methods that allow designers, customers and other stakeholders to ‘experience themselves’ rather than watching someone else’s experience. Since experiences are subjective by nature, trying them is an effective way to understand them. Prototyping can be done from the perspective of service theatre. Service theatre provides an approach to dramatizing service experiences through the theatrical tools of setting, performance, actors and audience (Grove et al. 1992). In theatre, improvisation is an essential tool for creating alternative performances. Improvisation is the creative act of spontaneous invention. In many ways, the hardest part of creating new services is creating successful human interactions. Theatre provides a framework for improvisation that enables testing alternative 202

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interactions. With improvisation, it is possible for service employees to learn alternative interactions with customers (Daily et al. 2009). Improvisation has also been used in services marketing classrooms (e.g. in Ireland, the US and Portugal) as a method for teaching students how to adapt to customer needs. Prototypes can be more exploratory and low fidelity, or more refined and highfidelity. Exploratory prototyping can be used to test new service concepts in early design stages (Katz 2011). These low-fidelity prototypes are put together quickly with low cost and effort. They might be sketched on paper and participants role play in a rough service interface (Saffer 2010). Exploratory prototypes are useful for testing a service idea at an early stage, which allows evaluating overall benefits and functionality. Developmental prototyping can help develop ideas for a new service or develop improvements to an existing service (Katz 2011). In some cases, this might involve testing specific elements of the service such as a new role for technology. In other cases, it might mean bringing multiple parts of a service together and simulating how it would run. Developmental prototyping may involve high-fidelity prototypes, which represent the service process, people and environment in ways that are closer to how the service should really work. Whether the team engages in exploratory or developmental prototyping, this activity is crucial for generating feedback and rapidly improving service ideas. Services are so complex that it is impossible to anticipate everything that may happen, especially because customer experiences result from complex interactions with other customers, service employees, physical environment, and technology systems. Prototyping is a way to combine all of the service elements so that they can be tested, improved and retested in an iterative process.

Conclusion This chapter reviewed the importance of service innovation for global service organizations, described the nature of creating new services, and explored the iterative process of designing new services. It synthesized different contributions to help researchers further develop service design as an interdisciplinary field. This chapter also offered guidance for practitioners to explore service design methodologies to create new services through the work of multidisciplinary teams, and described the service design stages of understanding the customer experience, designing the service offering, and prototyping the service experience. Creating new services is a challenging endeavour that can significantly improve the ability of global service organizations to serve customer needs in ways that enhance their lives. Most important, creating new services requires being open to customers’ dreams and latent needs that were not previously considered, being open to new service possibilities beyond the existing service boundaries, and being open to new contributions that are crucial for an interdisciplinary service design approach.

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Connecting online Service Design and Innovation Conference, www.servdes.org 

The organizers of this conference seek to be the premier research conference within service design and service innovation.

Service Design Network, www.service-design-network.org 

The Service Design Network is a non-profit organization that acts as a forum for practitioners and academics to advance the field of service design.

Service design tools, www.servicedesigntools.org 

This website contains an impressive collection of service design tools.

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Author biographies Lia Patrício (BS, MBA, and PhD from University of Porto) is Assistant Professor, Department of Industrial Engineering and Management at the University of Porto. She is a part of the global faculty of the Center for Services Leadership at Arizona State University, and of the MIT Portugal and CMU Portugal faculty. Her research focuses on service design and customer experience, particularly the design of technology-enabled services and complex service systems. She has been involved in research projects for designing new service concepts and enhancing the customer experience in several industries, including retailing, banking, transportation, IT and health care. Her research has been published in the Journal of Service Research, Journal of Service Management, Managing Service Quality, and Requirements Engineering Journal. Raymond P Fisk (BS, MBA, and PhD from Arizona State University) is Professor and Chair of the Department of Marketing at Texas State University. His research focuses on services. He has published in the Journal of Marketing, Journal of Retailing, Journal of the Academy of Marketing Science, Journal of Service Research, European Journal of Marketing, Service Industries Journal, Journal of Service Management, Journal of Health Care Marketing, Journal of Marketing Education, Marketing Education Review, Touchpoint, and others. He has published five books: Interactive Services Marketing, 3rd Ed.; Services Marketing Self-Portraits: Introspections, 206

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Reflections and Glimpses from the Experts; Marketing Theory: Distinguished Contributions; AIRWAYS: A Marketing Simulation; and Services Marketing: An Annotated Bibliography. In 2005, he won the Career Contributions to the Services Discipline Award from the AMA Services Marketing Special Interest Group. In 2012, he received the Grönroos Service Research Award from the CERS Centre for Relationship Marketing and Service Management at the Department of Marketing, Hanken School of Economics, Finland. Dr Fisk serves as a member of the Distinguished Faculty for the Center for Services Leadership, Arizona State University.

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