NSD Processes and Practices in Experiential Services*

This paper examines new service development (NSD) in a distinctive set of services: experiential services. Organizations delivering experiential services place the customer experience at the core of the service offering. They focus on the experience of customers when interacting with the organization rather than just the functional benefits following from the products and services delivered. Increasingly, organizations are recognizing that managing customer experiences is a powerful way of differentiating from competitors, establishing emotional connections, and increasing customer loyalty. Studying experiential services sheds light on this highly intangible type of services and, by representing an extreme end of the service spectrum, can advance the knowledge on the wider area of new product and service development. This paper addresses three research questions: (1) What are the processes and practices used in the development and design of experiential services? (2) How are these processes and practices similar to or distinct from established NSD practices? (3) How do these findings reflect on the wider area of NSD? The study concentrates on five dimensions of NSD: (1) the process; (2) market research; (3) tools and techniques; (4) metrics and performance measurement; and (5) organization. For each of these areas propositions are formulated and refined with empirical data. Using the case research methodology, empirical data were collected in 17 case companies: experiential service providers, design agencies, and consultancies known for focusing on the customer experience. The main method of data collection was interviews with those involved in experiential service design, such as founders, executives, or experienced designers. The case data revealed a number of practices specific to experiential services. These include a strong emphasis on gathering customer insights, in several cases obtained through empathic research and ethnographic research techniques. Other specific practices for experiential services include mapping customer journeys or touchpoints and storytelling. The case study companies also revealed a trade‐off between relatively formal, tight methodologies and more flexible, loose methodologies in NSD. More research is required to investigate the contingency factors surrounding tight or loose methodologies. The results also revealed the use of more broadly used NSD practices, such as a systematic NSD process, multiple performance measures, cross‐functional teams, and front‐line involvement. The observations from this study are captured in a set of seven propositions concerning NSD in experiential services. Reflecting on NSD in general, this study highlights the important role of service process innovation compared with service product innovation and the importance of continuous innovation requiring NSD processes and practices that are more flexible, iterative, and nonlinear. The study also supports the argument that different types of services may require different NSD processes and practices.     

New Product Development Practices of Industrial Marketers*

William L. Moore personally interviewed a number of senior managers employed in 25 large industrial marketing companies about new product development practices. These managers are familiar with all phases of the development of typical new products, from the time ideas are generated until market introduction. Most respondents were either division heads or those directly responsible for a division's new product development program. In agreement with a previous study, the use of formal new product strategies and sophisticated quantitative marketing research techniques was found to be lacking in most companies. However, many other elements of the new product development process were carried out more completely than previously reported. For example, respondents reflected sensitivity to informal understanding of new product strategies. A number of the less sophisticated, small scale qualitative research methods actually used may be more appropriate than more sophisticated methods. While several research areas are suggested, the general assessment of the new product practices of these firms is more positive than that of Feldman and Page.     

Innovative versus incremental new business services: Different keys for achieving success

In companies where new product development plays an important strategic role, managers necessarily contend with a portfolio of projects that range from high technology, new‐to‐the‐world, innovations to relatively simple improvements, adaptations, line extensions, or imitations of competitive offerings. Recent studies indicate that achieving successful outcomes for projects that differ radically in terms of innovativeness requires that firms adjust their NPD practices in line with the type of new product project they are developing. Based on a large‐scale survey of managers knowledgeable about new product development in their firm, this study focuses on new business‐to‐business service projects in an attempt to gain insights about the influence of product innovativeness on the factors that are linked to new service success and failure. The research results indicate that there are a small number of “global” success factors which appear to govern the outcome of new service ventures, regardless of their degree of newness. These include: ensuring an excellent customer/need fit, involving expert front line personnel in creating the new service and in helping customers appreciate its distinctiveness and benefits, and implementing a formal and planned launch program for the new service offering. Several other factors, however, were found to play a more distinctive role in the outcome of new service ventures, depending on how really new or innovative the new service was. For low innovativeness new business services, the results suggest that managers can enhance performance by: leveraging the firm's unique competencies, experiences and reputation through the introduction of new services that have a strong corporate fit; installing a formal “stage‐gate” new service development system, particularly at the front‐end and during the design stage of the development process; and ensuring that efforts to differentiate services from competitive or past offerings do not lead to high cost or unnecessarily complex service offerings. For new‐to‐the‐world business services, the primary distinguishing feature impacting performance is the corporate culture of the firm: one that encourages entrepreneurship and creativity, and that actively involves senior managers in the role of visionary and mentor for new service development. In addition, good market potential and marketing tactics that offset the intangibility of “really new” service concepts appear to have a positive performance effect.     

Best Practices for New Product Pricing: Impact on Market Performance and Price Level under Different Conditions

To date, research on new product pricing has predominantly been approached as a choice between market skimming and penetration pricing. Despite calls for research that addresses other complexities in new product pricing, empirical research responding to these calls remains scarce. This paper examines three managerial price‐setting practices for new products, i.e., value‐informed, competition‐informed, and cost‐informed pricing. By engaging in these practices, managers can develop and compare quantifications in order to attain an introduction price for the product. The authors draw on consumer price perception literature, Monroe's pricing discretion model, and numerical cognition literature to develop hypotheses about the impact of price‐setting practices on new product market performance and price level. By studying the effects on market performance and price level, the paper provides insights that may help explain the growth of new products and address the problems of underpricing. The hypotheses are tested in a management survey of 144 production and service companies. The results indicate which pricing practices are superior for the achievement of either higher market performance or higher prices in specific product and market conditions. Whereas value‐informed pricing has an unambiguous positive impact on relative price level and market performance, the results also suggest that in many cases engaging in value‐informed pricing is not enough. The effects of cost‐informed and competition‐informed pricing may differ depending upon the objective (market performance or higher prices), product conditions (product advantage and relative product costs), and market condition (competitive intensity). Engaging in inappropriate pricing practices leads to a decline in new product performance. Moreover, bad pricing practices make the positive effect of product advantage on the outcome variables disappear. The latter finding suggests that companies can jeopardize their efforts and investments in the new product development process if they engage in the wrong price‐setting practices. The findings imply that managers should consider different factors in new product pricing. First, when launching a new product, they should determine their explicit pricing objective, either stressing market performance or a higher price level. To determine the most appropriate pricing practices, however, they should next assess their situation in terms of product advantage, relative product costs, and competitive intensity. Together with the pricing objective, these conditions determine the best pricing practice. On a higher level, the findings imply that companies should invest in knowledge development in order to engage in the appropriate pricing practices for each product launch.     

Product Development and Management Association's 2012 Comparative Performance Assessment Study

Results of Product Development and Management Association (PDMA)'s Comparative Performance Assessment Study are presented from 453 companies. In addition to baseline questions from previous studies, new sections on culture, social media, services, sustainability, open innovation, and global product development practices are introduced. Extensive comparison between the best performing companies and the rest of the sample reveal numerous practices that lead to higher product performance in the market. Comparisons are also made between this study and previous PDMA best practices studies. In addition, geographic differences among North America, Europe, and Asia are explored. Practices leading to higher commercial performance are identified.     

Changing Strategies and Tactics for New Product Development

There has been a considerable amount of effort and writing devoted to improving the new product development process during the last two decades. Although there have been some surprises in this literature and in reports from the field on how to manage this complex business process, we now have a good view of the state-of-the-art practices that work and do not work to accelerate commercial success of new ventures. We know much less about how firms change their strategies for new product development.
In this article, we report on a study to investigate how companies change the way they originate and develop new products in manufacturing. We made no prior assumptions about what best practices might be for changing the direction of the new product development process, but we reasonably were sure there would be trends in how companies were attempting to create this strategic change. Even though one size does not fit all, there were significant trends in our findings.
We studied eight manufacturing firms using in-depth, open-ended interviews and were surprised to find that most of these companies are beginning to develop products that are new to the firm, industry, and the world (nearly half, or 10 of 21 new product projects), where they had not been eager for radical change in the past. These newer products likely are to be driven by a combination of market and technology forces, with general requirements being directed by internal forces: middle and top management. Results also indicate significantly that being able to marshal resources and capabilities is easier if change is less demanding and less radical, but when middle managers are driving the conversion of general requirements into specifications, resource issues have yet to be resolved. Implications of these findings are discussed for companies aspiring to change the entire process of new product development in their firms based on these significant results.     

New Product Management Practices of Small High Technology Firms

Various methods exist for managing the planning, cost estimating, scheduling and statusing of new product development projects. David Boag and Brenda Rinholm investigate whether the use of formal management procedures and structured frameworks are the most effective methods for achieving control over new product development activities. This article describes the new product development management practices of 33 small and medium-sized high technology companies. The authors employ a judgmental procedure to group the firms into three stages of development for their management of new products. Findings indicate that success at new product development is greater for more formalized companies than for companies which are less formalized or which use informal methods.     

Success Factors for Service Innovation: A Meta‐Analysis

Service sectors form a considerable part of the world economy. Contrary to the logical assumption that service innovation research should represent a significant share of all innovation research, the vast majority of innovation studies focus on products as opposed to services. This research presents a meta‐analysis of the antecedents of service innovation performance conducted on 92 independent samples obtained from 114 articles published between 1989 and 2015. This research contributes to our understanding of service innovation in three major ways. First, this is the first meta‐analysis that specifically assesses the relative importance of antecedents of service innovation performance, while also pinpointing the differences in meta‐analytic findings between antecedents of service and product innovation performance. Although there are some universal success factors that transcend the boundaries between services and products, the presence of marked differences implies that it would be wrong to treat the development of new services and new products as the same. Second, the meta‐analysis demonstrates that the antecedents of service innovation performance are contingent on the sector context (i.e., explicit versus tacit services). Comparing results between products and services, and between tacit and explicit services, there appears to be a continuum where explicit services sit interstitial between tacit services on one side and products on the other. Third, the meta‐analysis compares and contrasts the antecedents of two dimensions of service innovation performance (i.e., commercial success and strategic competitive advantage). Previous meta‐analyses treated these two dependent variables collectively, which falls short of identifying issues that may affect management decisions when faced with different objectives. Additionally, this research investigates the effect of several other moderators (i.e., culture, unit of analysis, journal quality, and year of publication) on the relationships between the antecedents and service innovation performance. The results are discussed in relation to their implications for research and managerial practice.     

Managing requirements capture within a global telecommunications company

Many firms engage in research activities with the purpose of finding information about the future state of technology, competition and the market. In parallel, companies absorb knowledge through a variety of social and political processes that also influence decision‐making. Such activities enhance understanding of a firm's internal and external environment, so that it can develop and evaluate new product or service ideas more effectively. How firms manage this process is critical to define and prioritise new product development ideas – how organisations find the 'right' idea is critical to ensure future market success. This paper seeks to gain a better understanding of how the knowledge used to create new products and services is acquired, what organisational structures facilitate or impinge this process and how individuals and groups within organisations behave in the very early stages of new product development. An in-depth case study of a global telecommunications company is presented and the management processes for a number of different projects in various divisions of the company are compared and discussed.     

Launch Decisions and the Early Market Survival of Innovations: An Empirical Analysis of the Italian Mobile Value‐Added Services (VAS) Industry

There is a surprisingly high number of new products and services that fail to produce enough return on the firm's investments in development and launch activities. Literature has shown that these failures can be due to a poorly planned and executed launch. Although a vast stream of research has studied how strategic and tactical launch decisions affect the performance of new products and services, some issues still need theoretical and empirical investigation. This paper aims to extend new product launch research in two ways. First, it studies how tactical launch decisions (i.e., investments in advertising and involvement of external organizations in the launch process) interact with an important strategic choice (i.e., the degree of radicalness of the new product or service) to affect new product performance. Second, it focuses on a particular dimension of performance, that is, early market survival, which has been overlooked in launch strategy and tactics research so far. Using a data set comprising more than 9300 new mobile value‐added services launched in Italy between 2003 and 2006, the paper finds that launch tactics interact with the radicalness of the innovation to affect early market survival. In particular, communicating the distinctive characteristics of the new product or service and partnering with external organizations during the launch process are tactics that work particularly well with radical innovations. This is possibly due to the fact that they help reduce customers’ uncertainty regarding expected benefits and transaction costs, and hence contribute to win their resistance to adopt the innovation soon after launch. Investments in corporate advertising lead instead to a tangible improvement of the probability of early market survival for both radical and incremental innovations. In other words, the positive impact on the probability of early survival of increasing investments in corporate advertising appears to be relevant for both radically and incrementally new services. One possible explanation is that this tactic helps increase the number of potential customers who come to know about the existence of the innovating firms and its offering soon after launch, but this is likely to be equally important to stimulate early diffusion of both incremental and radical innovations.     

PERSPECTIVE: Creating a platform-based approach for developing new services

This article explores the design and renewal of services. We do this through the lens of methods and processes for developing product platforms for physical products. We first articulate principles for effectively developing next generation product lines using platform concepts, and illustrate these principles with examples drawn from computer and electronic products. These principles include creating new insights into a firm's market segmentation, understanding both the perceived and latent needs of users, and doing so for new as well as existing groups of customers. These platform principles also include the design and implementation of subsystems and interfaces that can be used across different products and across different product lines. Such subsystems and interfaces become the operational platforms for new product development purposes. An approach to platform-centric organization design is also presented.
We then make the extension to services by applying these principles to understand the innovations of a large international reinsurer. This company has resegmented its market to identify unfulfilled needs and growth opportunities. It also defined new service platforms, comprising operational activity areas that closely follow the value chain of how it wished to provide new reinsurance solutions to its customers. This reinsurer also had to organize differently to facilitate the development and deployment of the capabilities required for its new services. The analogies between these service innovations and those platform innovations of manufacturers are both clear and striking.
We conclude by considering the difficulties faced by firms seeking to transition from a single product, nonplatform focused approach to new product development to the platform-centric ones described here.     

Does an extrinsic reward for R&D employees enhance innovation outcomes? Evidence from a Japanese innovation survey

This paper examines the effects of extrinsic rewards for R&D employees on innovation outcomes based on evidence from a Japanese innovation survey. Theoretical and empirical studies present conflicting findings regarding the relationship between extrinsic rewards and innovation outcomes. This article seeks to shed light on the relationship between rewards and outcomes, as represented by the development of new products and services and their technological superiority and profitability. The analysis produced the following findings. First, companies that have introduced an evaluation system based on R&D performance are more likely to develop new products and services. The introduction of the evaluation system brings about success in product innovation with greater technological superiority. Second, monetary compensation has a negative impact on the development of new products and services and technological superiority. Third, these effects vary with the company size. Small- and medium-sized companies achieve higher technological superiority with performance-based evaluations. Large companies tend to adversely impact the development of new products and services and their technological superiority with monetary compensation.     

Improving firm positioning through enhanced offerings and buyer-seller relationships

We analyze the strategic repositioning of firms through changes in their market offerings and buyer-seller relationships. Based on literature from strategy, marketing, economics, and information systems, we formulate a two-by-two matrix to examine alternatives for positioning. We evaluate the framework with four case studies of companies that have recently moved toward more complete product/service offerings and stronger relational linkages with customers. These moves followed two different paths. The product/service path initially focused on the development of new and related products, product bundles, and the addition of product-related services. The relational path first focused on establishing closer relationships with customers including closer operational linkages, enhanced information sharing, more fully articulated legal and contractual obligations, and enhanced cooperation. In all the cases, the strategic repositioning was influenced by customer needs and enabled by information technology and the acquisition of new competencies through networking.     

Success and Failure in New Industrial Services

The critical role of innovation has long been recognized in physical goods; however, the development of innovative services has received much less attention. The research described here reports on an early major study of success and failure in new industrial services. Building on her integration of two literatures on new product innovation and services marketing, Ulrike de Brentani reports how companies measure new service performance and the factors which are associated with success. She reports that new industrial services share some important success factors with physical goods, such as the firm's market orientation, a formal service development process, project synergy and a truly superior new service offering. Yet she finds that firms must adjust their approach to the distinctive character of services, including customer perceptions of service quality, features that successfully differentiate services in competitive terms and cost reduction.     

Innovation: A data-driven approach

A newly introduced product or service becomes an innovation after it has been proven in the market. No one likes the fact that market failures of products and services are much more common than commercial successes. A data-driven approach to innovation is proposed. It is a natural extension of the system of customer requirements in terms of their number and type and the ways of collecting and processing them. The ideas introduced in this paper are applicable to the evaluation of the innovativeness of planned introductions of design changes and design of new products and services. In fact, blends of products and services could be the most promising way of bringing innovations to the market. The most important toll gates of innovation are the generation of new ideas and their evaluation. People have limited ability to generate and evaluate a large number of potential innovation alternatives. The proposed approach is intended to evaluate many alternatives from a market perspective.     

An innovation activity model for Very Small Entities in the software sector: an empirical study

Innovation management is a subdiscipline of management that studies the rules that govern the generation, diffusion, adoption of innovation, and relationships between innovation inputs and outputs. A great number of innovative products and services depend on software. In the software industry, many small entities act as subcontractors that develop components that are later integrated into larger industrial systems. However, these small entities do not have the resources needed to support long-term R&D activities and they also lack innovation management models which makes the planning and execution of innovation management difficult. These same small enterprises face similar challenges in the software development process. However, the ISO/IEC 29110 standard provides small enterprises with a clear path in implementing a systematic software development process. The planning and execution of innovation management activities may also benefit from a similar approach. This article describes an innovation activity model suited to the characteristics of small entities whose main stream of revenue is software development. Using the existing literature, standards, and the practical experience of companies with a successful history of developing innovative software-based products, this study identifies the activities and practices that lead to the development of innovative products. Interfaces between innovation management activities, software development processes, and work products are also identified.     

An empirically-based typology of product innovativeness for new financial services: Success and failure scenarios

During the last decade, an increasing number of studies have been concerned with the factors that lead to new service success. Quite a few studies, however, have examined the role of product innovativeness in new service development and performance. The present article aims to test empirically a widespread, yet under‐researched argument, according to which, different innovative types may be associated with different development patterns and performance outcomes. On the basis of a detailed literature review we designed the conceptual framework for the present study. More specifically, we propose that the performance outcome of a new service is the result of the development process followed, which, in turn, is influenced by the innovativeness of the new service. The development process is examined through three blocks of variables, namely new service development activities (i.e., the “what” component), process formality (i.e., the “how” component) and cross‐functional involvement (i.e., the “who” component). Performance is viewed in relation to both financial and non‐financial outcomes. The different dimensions of innovativeness form the basis of our classification scheme. To collect the data, we followed the “dropping off method. That is, we handed in self‐administered questionnaires to participants and, a picking‐up appointment was set. Respondents were NSD project leaders who were asked to select two financial services, one successful and one unsuccessful, that they had developed within the last three years and reply to all questions relating to the development and launching of these services. Overall, 84 financial companies participated in the study, providing data for 132 new financial services (80 successes and 52 failures) developed and marketed in Greece. Data analysis revealed that six distinct service innovativeness types exist. They can be represented in the form of a continuum depending on the degree of innovativeness that characterizes each type. At the most innovative extreme of the continuum we find the new‐to‐the‐market services followed by new‐to‐the‐company services, new delivery processes, service modifications, service line extensions, while at the least innovative end service repositionings are placed. These six types are found to be associated with different development patterns in terms of activities, formality and cross‐functional involvement as well as performance outcomes. Interestingly enough, our data suggest an almost inverted U‐shaped relationship between the degree of innovativeness of a new financial service and financial performance. On the other hand, the major service innovations make the strongest contribution on non‐financial performance, while “me‐too” offerings are the least successful ones. The study has a number of research contributions as well as implications for managers involved in new service development in the financial services industry. The conceptualization of the continuum of innovativeness helps disclosing the critical points of the NSD process and its structuring which, depending of the type of new service and the degree of innovativeness that characterizes it, ensures that the management's objectives regarding the performance of the new service are attained.     

The Augmented Service Offering: A Conceptualization and Study of Its Impact on New Service Success

Unlike companies that produce tangible goods, service firms typically cannot rely on product advantage as a means for ensuring the success of a new service. Developing a competitive response to a tangible product may require significant investments of time and effort. In many cases, however, competitors can easily duplicate the core elements of a firm's new service. This fundamental difference between new products and new services means that managers who hope to find the keys to new-service success must look to factors other than sustainable product advantage. Chris Storey and Christopher Easingwood suggest that managers must understand the totality of the service offering from the customer's perspective. They explain that the purchase of a service is influenced not only by the service itself, but also by such factors as the service firm's reputation and the quality of the customer's interaction with the firm's systems and staff—in other words, by the augmented service offering (ASO). Using the results of a study they conducted in the consumer financial services industry in the U.K., they identify the components of the ASO, and they examine the relative contributions of these components to the success of new services. In their model, the ASO comprises three elements: the service product, service augmentation, and marketing support. The core of the ASO—the service product—includes such dimensions as product quality, product distinctiveness, and perceived risk. The study's results suggest that improvements in the service product open up new opportunities for the firm, but have only modest effects on sales and profitability. Rounding out the ASO model are service augmentation and marketing support. Service augmentation encompasses such dimensions as distribution strength, staff-customer interactions, and reputation. The customer recognizes and responds to these elements of the ASO, but they are not part of the product core. Marketing support involves those marketing and management actions that affect the quality of the product and its augmentation, even though customers typically are not aware of them. These elements include knowledge of the marketplace, training of contact staff, and internal marketing. Enhanced service augmentation has significant effects on profitability and sales for the firms in this study, but it does not offer enhanced opportunities. The marketing support elements contribute significantly to all aspects of performance for the firms in this study.     

A Survey of New Product Evaluation Models

New product development is a dynamic and lengthy process ranging from idea generation through product launch. It is quite important that product managers evaluate the viability of a new product at every stage of its development. Previous literature provides a large number of models that can be used to evaluate new products at different stages of the new product development process. These models vary with respect to their objectives, applicability to different products, data requirements, suitable environments and time frames, and diagnostics. This article presents a critical review of the models with an emphasis on these factors. The article also outlines other emerging methods that companies are using today. It concludes with managerial and research implications. © 1999 Elsevier Science Inc.     

Assessment of hidden and future customer needs in Finnish business‐to‐business companies

The development of new products should be based on the needs expected to exist even several years ahead – at the moment of market introduction and during the whole lifecycle of the product. To develop successful new products in the toughening business environment, companies should be able to surpass customers' expectations and to assess emerging customer needs proactively. Early, thorough understanding of the customer's real needs, including the assessment of hidden and future customer needs and requirements, plays a very important role in the successful development of new products.
The purpose of our paper is to study the assessment of new (hidden and future) customer needs for product development in Finnish business‐to‐business companies. We have carried out a survey in 93 Finnish business‐to‐business companies and SBUs to study their common problems in the assessment of unrecognized customer needs and potentially effective ways in clarifying new customer needs and dealing with important problems. On the basis of the results, we propose several possible ways to facilitate the assessment of unrecognized customer needs.