The Contribution of Front-line Employee Involvement in the New Service Development

Introduction Academic researchers and business managers recognize the importance of product and service innovation as primary drivers of organic growth because new offerings yield opportunities to increase revenue, expand market share, and enhance profits. New offerings vary from new-to-the world, through new to the firm or market, to improvement, repositioning or cost reduction of existing products, and

customer-focused firms will build some form of innovation into their business strategy as a means of optimizing business performance.(Melton, 2007) The marketing literature has studied how businesses involve customers in various stages of product development, and researchers have argued that coproduction of services makes customer participation in the innovation process even more important for new service development (NSD) than for the development of new tangible goods (Alam & Perry, 2002). Academics and business managers generally agree that customer and front-line employee involvement in the NSD process results in a more successful service product, but there has been little research on front-line employee involvement in NSD comparable to the study of customer involvement undertaken by Alam (2006).

Kelly and Storey (2000) assert that few companies conduct their service development by actively involving their front-line employees. Kelly and Storey consider this remarkable as the companies may run into problems when introducing the new service since the implementation of new service is assumed to go faster and easier when the front-line-employees take part in the process. Kelly and Storey work mainly with the different systematic procedures that are being used within the companies to develop new services. The front-line employees represent the critical link between the service organization and the customer. They are responsible for understanding the customers needs as well as interpreting their demand in real-time. This category of employee gains experience in understanding the customers wants in different situations and therefore is an asset when new or existing services are to be developed. Since many services are being produced in the interaction between employees and customers and is often being repeated, creating good conditions for the employees to deliver good quality services is important. The front-line employees are the people working closest to the customers and they are involved in the internal processes as well. Front-line employees who have an influence on the development process enable a greater acceptance for the service which also leads to a simplified service implementation. Martin Jr and Horne (1995) also consider the front-line employees to have an important function in the service development process because of their

knowledge of customers and competitive offers that may contribute to defining the balance between standardization and adaptation to individual customer needs and at the same time observe user friendliness and cost. Customer involvement in service development has been studied for many years(Alam & Perry, 2002) and the results show that learning from and with customers is a fruitful way to create value in the development process. Customers contribute with ideas to new or improved services, provide information on their latent needs, and help clear glitches in early versions of new or improved services. Customers become co-developers and to co-opt customer competence is a strategy used by some of the most successful companies (Prahalad & Ramaswamy, 2004). When it comes to involving frontline employees in developing new services, however, there is almost no empirical research within the service discipline. It is reasonable to assume that employees can also contribute to a more efficient development process; their knowledge, skills, and experiences from dealing with customers, partners, and internal organizational units as well as various support systems can contribute not only to the development process but also to the outcome, which is the new service. Some scholars argue that front-line employees play an important and crucial role in the development of new services. Furthermore, employee involvement will increase the acceptance and introduction of the new service in the organization(De Jong &

Vermeulen, 2003) The article (a) briefly reviews studies on front-line employee involvement in new service development; (b) describe the front-line employees involvement and contribution to the new service development process, (c) suggest how to effectively involve the front-line employees in new service development. Background Literature New Service Development Process Although the new product development is a well-searched field with highly formalized processes and tools, such sophistication does not yet exist for new service development processes (Johne and Storey 1998; Alam and Perry 2002). NSD process is evolved from NPD process. (Melton, 2007) Booz, Allen and Hamilton proposed a sequential model of well-defined process steps consisting of new product strategy, idea generation, screening, evaluation, business analysis, development, testing and commercialization. Then Scheuing and Johnson (1989) proposed an extensive, 15 step empirically-based model of new service development with clearly defined roles for users, customer contact personnel and other employees. In presenting their model, Scheuing and Johnson (1989) group the 15 steps into four stages: direction, design, testing, and introduction.(Scheuing & Johnson, 1989) This article adopts the NSD process cycle of Johnson, et al. (2000). Johnson, et al.

(2000) effectively translates the complex, iterative process model of Scheuing and Johnson (1989) into a simpler, four stage NSD process cycle. In addition, the Johnson, et al. (2000) model succinctly captures the basic phases shared by most of the process models in the new service development literature. The four NSD stages are: (1) design - setting new service strategy and objectives, idea generation and screening, and concept development and testing (2) analysis - business analysis and project authorization (3) development - service design and testing, process system design and testing, marketing program design and testing, personnel training, service testing and pilot run, (4) full launch - full-scale launch and post-launch review. Front-line Employee Involvement Schneider and Bowen (1984) argue that front-line employees are a valuable source of new service ideas and are even more useful in helping to determine ways to implement a new service to get a favorable customer response. Service employees are boundary spanners with empathy both for the employing organization and the consumers being served (p. 87). Frequent, empathetic interactions with customers give employees a sense of what customers want and need, and how a service innovation would best be received by them. Also, participative decision-making (i.e.,

involving employees in the design, development and implementation of new services) increases employee acceptance of decisions and facilitates implementation of those decision. Schneider and Bowen (1984) contend that front-line employee involvement in NSD improves the technical quality of the new service, improves the climate and employee morale in the service establishment, and positively affects customer loyalty. Conclusions The contribution of front-line employee in NSD Stages of NSD Design The front-line employee activity Analysis Suggested ways to realign or augment present services to match consumer needs more closely. Identify the front-line employees needs.

Limited feedback on financial data, including profitability of the concepts, competitors' data. Play as a lead user Testing prototypes, giving employees an opportunity to communicate their view of the already developed material. Development work where employees may be involved in developing for example a process manual

Development

Full Launch

Improving efficiency, simplified implementation and the launch of new service Define employee training needs Predict customer reaction to ads and promotions Advise how best to sequence introduction of various aspects of the new service

Service firms were less likely to engage front-line employee in design stage than in most other stages of the development process. In recommending reform of service

industry development practices, Bowers (1989) specifically urged firms to use front-line employee as a valuable internal source of new ideas, because they are familiar with customer needs. On the other hand, the new service offering will also affect the customer service employees experience.(Ramaswamy & Gouillart, 2010) If the new service cant also offer value to the front-line employee, they wont wholeheartedly participate in the service. The involvement of front-line employee in the design stage can also help the design team to find out what is valuable to the front-line staff and create more essential buy-in. Melton and Hartline (2010) assumes there is no active role for front-line employees in the analysis stage since that stage primarily involves managerial activities such as economic analysis, market assessment, profitability analysis, commitment of resources by top management, and detailed competitive analysis. Although there is not much effort the front-line employee can do, they still can provide limited feedback on financial data, including profitability of the concepts, competitors' data. According to prior studies, the front-line employees were mainly involved in the development stage and the implementation/launch stage. At the development stage, the involvement was mainly by the front-line employees in the form of lead users, or by carrying out tests and getting involved in work groups which then contributed to the development of new services. Usually the development team will offer the new

service prototype to front-line employees only for a short time, to gauge reaction to price, promotion and other marketing variables. In trying prototypes, tests were performed where the front-line employees communicated their views of already developed material. Among other things, the front-line employees also developed a foundation for a process manual by creating folders and manuscripts for the new service. The front-line employees participation also resulted in improving efficiency contributions, for example, in the form of simplified implementation and launch. The employees influenced not only the co-worker processes, but also the customer and technical processes. Even the service system was influenced to some extent by reorganizations. Schneider and Bowen (1984) are specific when they discuss outcomes of employee involvement in the development and implementation stages of new service development. In preparation for roll-out of a new service, employees can (1) define employee training needs, (2) predict customer reaction to ads and promotions, (3) suggest ways of altering computer support to increase efficiency, and (4) advise how best to sequence introduction of various aspects of the new service. Sonesson (2007) has focused on the active involvement of front-line employees in the service innovation process in a Swedish bank. His results show that the front-line

employees were mainly involved in the later phases of the innovation process where the new services are designed and launched, but only partly in the earlier stages where ideas are generated and new service development projects are formed. According to the research of Melton and Hartline (2010) prior conceptual research had envisioned front-line employees as a source of ideas; the firms just need to effectively involve them in. Recommendations Almost every company claims that innovation is their core mission and values statement. Melton and Hartline (2010) point to a need for additional study on how to enhance the effectiveness of front-line employee involvement in the NSD process. To encouraging front-line employees participate in any innovation challenge; there are five important managerial components need to be considered.(Moosa & Panurach, 2008) People The front-line employee should be coach to look for nascent idea, learn how to describe and how to elaborate a rough idea. The company should publicize their effort and their role on company intranet. Process Install an innovation pipeline, a process for generating ideas through to

implementation in each location. Ideas are stimulated and generated by periodically posing innovation challenges to the front-line employees. When ideas are submitted by employees, they are quickly evaluated by the coaches and local managers against a set of transparent and publicly-known criteria and shelved or green lighted to the next stage. Tools Managers need to learn how to deploy innovation tools and methods to stimulate ideas, to initially describe and to elaborate ideas. Technology Apply technology to declare innovation challenges, to publish and share nascent ideas with the widest possible group across the enterprise. Encourage the formation of virtual communities by having coaches, managers and innovators openly comment on each others ideas. The Best Buy's social networking site, BlueShirtNation.com (BSN.com) is a good example to show how technology supports the front-line employee involvement in new service idea generating. The BSN.com is a space that employees actually wanted to participate in rather than making them feels as though they are being cajoled by corporate heads who just don't understand what it means to be on the "front lines. It really embraced the Best Buy employees ideas and intelligence within the internal groundswell.

Governance Effectively managing innovation requires a somewhat peculiar combination of allowing chaos to happen within a set of well-defined boundaries. Under such conditions, proposed ideas may range from the ridiculous to the sublime. Metrics Metrics helps the manager to effectively evaluate the front-line employees participation. Two general types of metrics are useful. (1) The first measures the level of engagement that front-line employees have in the new service development. Examples of engagement metrics include the percentage of employees submitting new ideas and the percentage of employees commenting on others ideas. (2) The second type of metric looks at the results of front-line generated ideas.

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