DISCOVERY OF NEW SERVICE CONCEPTS FOR GLOBAL MARKETS

Discovery of New Service Concepts for Diverse MarketsHarold CassabDepartment of Marketing, The University of Auckland Business SchoolPrivate Bag 92019, Auckland 1142, New Zealandh.cassab@Tuure TuunanenDepartment of Information Processing Science, University of OuluP.O.Box 3000, 90016 Univ. of Oulu, Finlandtuure@tuunanen.fiKen PeffersCollege of Business, Department of Management Information Systems4505 Maryland Parkway Box 456034, Las Vegas, NV 89154-6034ken.peffers@Charles E. GenglerDepartment of Marketing and International Business, Zicklin School of BusinessBaruch CollegeBox 12-240, One Bernard Baruch Way, New York, New York 10010Charles.Gengler@Wendy HuiUniversity of Nottingham Ningbo China, 199 Taikang East RoadNingbo 315100, Zhejiang, Chinawendy.hui@Ville VirtanenTelecom and Media USA, Tieto Corporation150 West 56th Street, #3402, New York, NY 10019ville.h.virtanen@AA major challenge in service design is the ability to generate useful service concepts for development.New service concepts, however, are often difficult for customers to articulate. In this study we address the idea generation stage of the service development process and suggest the integration of customer scripts to facilitate service concept discovery with the customer. We examine the process using data from in-depth laddering interviews with lead users of mobile services across three geographically diverse markets. Results show that the new service concepts generated in this study are applicable in all three markets although usage motivations differ by market. Advanced service design and development methods need to incorporate global customer differences explicitly in order to meet market needs.Key words: service development; service design; service discovery; requirements; lead users; ladderingHistory: Received Jan. 25, 2010; Received in revised form Apr. 13, 2010; Accepted Apr. 15, 2010; Online first publication Jul. 22, 20101.IntroductionA major challenge in the design of new services is the ability to discover user requirements that are generally difficult for customers to articulate (Thomke 2003, Ulwick 2002). Service managers are faced with the task of developing interactive services (Bolton and Saxena-Iyer 2009) that are quickly becoming part of the everyday life of many customers. For instance, 73% of Americans and 64% of Europeans are connected online, while 43% and 30% respectively are considered adopters of social technologies (Forrester 2007). Moreover, new service offerings mustmeet the requirements of customers whose service consumption defies traditional notions of a rational user (Tuunanen, Myers, Cassab 2008) and use information systems that offer services to consumers as customers1.The need for an emphasis on requirements discovery is reinforced by the reality we observe in contemporary service development. For instance, most social technologies (e.g., blogs, social networking sites, podcasts, etc.) are services developed for desktop environments, yet users increasingly seek to access them through their mobile devices. Undoubtedly such interactive services would be even more appealing if they were distributed via more sophisticated channels. In general, the basic value proposition of the service remains unchanged but the delivery channel increases the value obtained from the service. The predominant view in the literature is that superior products are designed to meet customer needs. It is extremely difficult, however, to meet tacit and unserved needs when customers frequently are not cognizant of their needs (Simonson 2005), product requirements include functional specifications as well as context of use (Novak and Hoffman 2008), and customers needs evolve over time (Michel, Brown, and Gallan 2008).Engaging users in development has been a topic of discussion in the information systems literature for the last two decades. Some researchers have argued that end-user involvement does not yield improvements in efficiency for a project (Saarinen 1990; Purvis and Sambamurthy 1997) while others (Kujala 2003) argue that end-user participation does have benefits, although a careful implementation is needed. In the marketing literature, the majority of studies in service design have concentrated on organizational issues and customer acceptance of delivery processes and service systems that are already in place (see Tsai, Verma, and Schmidt 2007).A relatively unpredictable use of interactive services suggests that involving customers in the design process could mitigate such uncertainty and that customer participation in service ideation and production can help the firm to anticipate value-in-use (Vargo and Lusch 2004) of their market propositions. According to Vargo and Lusch (2004), service dominant logic means a change from firms providing services of pre-determined value to a new landscape where firms only make value propositions; value is co-created and the total value of the offering is determined by the customer in use. The notion of co-creation of value with customers is particularly relevant because it highlights a disruption from the traditional view of service development, since it incorporates both customers and service designers as active participants in the value creation process. At the same time, there are implementation challenges in co-developing with consumers who may or may not be willing to provide their inputs.Extant research has stressed the importance of customer involvement in the generation of service ideas (see Matthing, Sanden, and Edvardsson 2004, for a review). Service ideas generated with customers are judged to be more original and innovative. Nonetheless, the proper strategy and execution of the co-design process with the customer is a rich area of inquiry in need of further empirical work (Ostrom et al. 2010).In our study, we focus on the requirements discovery process, integrating customer scripts to new service design with an emphasis on services that are developed for diverse markets. We investigate how differences in customer requirements across markets can be incorporated in early stages of the design and development of new services. We examine the discovery of new mobile service concepts with lead users from Hong Kong, Finland and USA. Our results show that customer needs for each location vary and suggest ways in which such diversity will have an impact on service design and development methods.The paper is organized as follows. First, we review relevant research in new service development in order to specify our research objectives. This is followed by a description and application of our approach to discover and define customer requirements for a mobile service provider across three geographically diverse markets. The context of this implementation is the discovery of service concepts related to the use of presence and location information about mobile customers to present them with information and choices of contextual value. In this process we use customer scripts to evoke concrete realizations and facilitate customer input in the discovery of new service concepts. Finally, we discuss our results and provide directions for future research.2.Conceptual BackgroundThe service development literature is rich on planning frameworks derived from product development models (Griffin 1997) and drivers of new service successes and failures (Cooper and De Brentani 1991, Martin and Horne 1993). Such models typically describe the new service development process as comprising four main stages (Tsai, Verma, and Schmidt 2007): 1) concept discovery, 2) develop and test concept, 3) detail specifications of delivery 1 In this paper we use terms customer and user invariably. Our paper therefore takes the view of users and/or customers as consumers of services with difference between them being whether the service is offered free-of-charge or not.process (operations, marketing, and service encounter/recovery) and delivery system (facility and information management), and 4) launch and debug.In the last two decades we have seen a large number of studies that tend to concentrate on specifications of delivery processes (Menor et al 2002) and delivery systems (Froehle et al 2000, Bitner, Brown, and Meuter 2000). Recent research has suggested that customers’ service ideas are more innovative and have higher user value than those of professional developers (Matthing, Sanden, and Edvardsson 2004) and has stressed the critical role of customer motivation as a driver of trial of technology-based services (Meuter et al 2005). Emerging research in the concept discovery stage has been largely concerned with increasing the quantity of ideas generated (Goldenberg, Mazursky, and Solomon 1999). We believe that more attention is needed to improve the appropriateness of ideas generated with users. It is difficult to test service ideas in the field (Thomke 2003) and in most instances the iterative approach consumes valuable organizational resources.Some authors have suggested ways to generate product ideas that anticipate customer needs, including lead user studies (von Hippel 1986), ethnographic studies (Leonard and Rayport 1997), collaboration with ordinary users (Dahl and Moreau 2002, Magnusson 2009), and more general “probe and learn” strategies (Froehle et al 2000, Griffin 1997, Sundbo and Gallouj 2000).This literature reveals that it is generally difficult for customers to articulate specific features or requirements of a new service. The interaction user-analyst is very important as the ability to define requirements effectively depends in part on the analyst’s familiarity with a domain and strong problem-solving skills (Pitts and Browne 2007). There are further complications in the requirements discovery process. On the one hand, analysts are subject to cognitive biases in judgment (Gourville 2005). On the other hand, users are subject to automaticity, motivational biases, and problems in recall (Browne and Ramesh 2002) that can prevent satisfactory requirements discovery results. However, these cognitive biases can be mitigated using prompting techniques (Browne and Ramesh 2002) in the development process.In dynamic development contexts, requirements can be seen as adjustable stories to enable a wide range of possibilities generated by user behaviours. Short stories can be generated using scenarios (Jarke, Bui, and Carol 1998). One approach used by information system architects is to generate descriptions of user behaviour that follow a core script or “metascript” (Abelson 1981). Metascripts are abstractly stated descriptions of user situations with a minimum of specification. These invoke the representation of steps in a sequence of activities related to a service encounter. The use of metascripts as stimulus relies on memory-based imagery of commonly experienced events and encourages the user to visualize specific action rules, circumstances, and consequences of a scenario. This type of visualization is likely to elicit more useful requirements (Dahl, Chattopadhay, and Gorn 1999) and the use of elaboration by the analyst results in the development of a richer representation of the requirements (Zmud, Anthony, and Stair 1993).Pieters, Baumgartner, and Allen (1995) have applied means-end chain analysis (Gutman 1982) to investigate structural characteristics of customer goals using the laddering technique. The result of a means-end chain analysis is a hierarchical value map or consumer decision map showing the salient linkages between attributes, consequences, and values for a group of consumers in some product class. The notion of a three-layered goal hierarchy of desirability, importance, and feasibility (Baumgartner and Pieters 2008) suggests that goal desirability and importance derive from the linkages of focal goals germane to the customer script to superordinate goals at the motivational level. Meanwhile, feasibility derives from the linkages of focal goals to subordinate goals at the operational level that provide value to users.Traditional laddering studies suggests that most abstract attributes are unrelated to concrete attributes, and abstract attributes are more related to hedonic aspects of products (Snelders and Schoormans 2004). In turn, Overby, Gardial, and Woodruff (2004) have shown that culture can influence the perceived importance of consumption consequences in foreign markets. Therefore, we will examine whether there are differences across markets in a) the importance of abstract and concrete service attributes; b) the importance of functional, personal, and social consequences of customer-defined service attributes; c) the service concepts derived from customer-defined attributes; and d) the customer usage motivation for similar service concepts.3.Research MethodsIn our study we use metascripts as stimuli to generate ideas for new service concepts. We use a two-step laddering approach to uncover superordinate goals and determine concrete attributes that enable customer-derived action rules. The motivation for our approach is to find a balance between the technologically possible and the socially desirable (Morelli 2007).Laddering is used to derive aggregate value chains (i.e., prototypical sequences of attributes, consequences, and values for a sample of customers) and to construct consumer decision maps. In a laddering interview, subjects are first asked to identify salient attributes that distinguish different choice alternatives in a product class. Next, they are prompted to verbalize sequences of attributes, consequences, and values (which are referred to as ladders) by repeatedly asking: “Why is this attribute (or consequence or value) important to you?" These individual ladders are then aggregated and summarized in a hierarchical value map or consumer decision map. Pieters, Baumgartner, and Allen (1995) have suggested some adaptations of laddering to model goal structures. Briefly put, the procedure starts with a focal goal that will generally be at an intermediate level in the goal hierarchy and goals above the basic level (i.e., superordinate goals) will provide the motivation for pursuing the focal goal. First, respondents are asked to list the superordinate goals they have for pursuing the focal goal. Then, for each goal provided, respondents are prompted to verbalize sequences of increasingly more abstract goals by repeatedly asking questions of the form: “Why is this important to you?” Goals below the basic level (i.e., subordinate goals) reflect the operational aspects of pursuing the focal goal and as such elicit the desired attributes of the service.We use the approach described in Peffers, Gengler and Tuunanen (2003) to guide the second part of the laddering interview and increase the number of concrete attributes. More specifically, questions of the form: “What about the system makes you think it would do that?” will be helpful in uncovering sequences of increasingly more concrete features of the customer script evoked. Although the process could be used to model individual customer scripts, our objective is to derive aggregate value maps for service concepts and groups of customers.3.1 Data CollectionWe apply our method to the definition of requirements among current customers of a mobile service provider. The context of this implementation is service offerings that make use of presence and location information about mobile device users. There are many possibilities for service development using presence to enable social interaction, develop interactive offerings, improve yield management, customize marketing communications, etc. The research context is extremely valuable. Mobile services are a fast growing market with $1 trillion in revenues by 20112. Presence and location data enable the deployment of customer solutions (Tuli, Kohli, and Bharadwaj 2007) for segments that are rather undefined for requirements definition.Recent studies in innovation suggest that companies need to look beyond their familiar surroundings to generate growth opportunities (Michel, Brown, and Gallan 2008). New ideas can come from tacit or unserved needs in foreign markets. Thus, to expand the frame of reference, we collected data from mobile customers in three diverse locations: Helsinki, Hong-Kong, and Las Vegas. Data collection was in the native language of each location. In each location we asked customers to think about ideas for new applications using presence and location data that would be valuable to them. Given the innovativeness of the offering we selected a sample of lead users. First, in line with von Hippel (1986) we assume that present needs of lead users will become general in a marketplace in the future. Second, lead users are generally motivated to identify desired functionalities for innovative applications using technology that they have not experienced (Morrison, Roberts, and von Hippel 2000). Third, lead users are also considered experts with a service and therefore expected to have clear representations and concrete realizations of the service script (Abelson 1981, Bateson 2002).We used the “snowball” method to recruit participants (Olson and Bake 2001). Starting with a small sample of known lead users by the researchers, we obtained referrals from each participant to others who might also be lead users. To screen the participants as lead users, we used a short questionnaire to assess general innovation adaptation and use of mobile and online services (see Appendix 1 for details). We used the responses of known lead-users in the area (i.e., our initial recruits in each of the locations) to develop cut-off points to determine whether the prospective participant was a lead user. In all of the locations this was considered to be 60% or more for each of the questions. This recruitment process resulted in a panel of 81 participants: 28 from Helsinki, 27 from Hong Kong, and 26 from Las Vegas. Sample demographics are shown in Table 1. The groups are not necessarily representative of their respective populations given that lead users status is specific to the domain of use.2/content/view/26041/1231/Table 1 Sample DemographicsHelsinki Hong Kong Las VegasGender Male 296 Female 261820Age Less than 20 3 - 320-29 17193 30-39 288 40-49 5-5 50-59 --7Education High School or Equivalent 22 1 12 Bachelor’s degree 3 10 8 Graduate degree 2 16 6Drawing from Pieters, Baumgartner, and Allen (1995), Gengler and Reynolds (1995), Reynolds and Gutman (1988), and Peffers, Gengler, and Tuunanen (2003), we conducted in-depth interviews with each participant using the laddering technique. During the interviews, the interviewers made digital audio recordings and took notes in a structured format. Each participant was shown a Macromedia Flash demonstration of the presence technology concept and some application examples that had been provided by a mobile phone provider for research purposes. After the demonstration we probed the participants for other applications that might be valuable to them. We then presented the participants a list of scenarios (see Appendix 2). These scenarios contain metascripts intended to evoke action rules for possible applications. We asked the participants to rank order the scenarios in terms of their importance. Then, one at a time, for the two highest ranked scenarios, the interviewer asked each participant to describe applications that would be important to them and then to describe desirable features for each application. The interviewer proceeded to ask the subject to explain why each particular feature is important, so as to elicit the consequences that the participant expects from the feature. The interviewing process continued by repeatedly asking “why is this feature (or consequence or value) important to you?” To elicit more concrete system features, we probed participants for more specific functionalities and asked them to describe their rationale. The data was recorded in the notes to derive aggregate value chains (i.e., as sequences of features, consequence, and values) and to construct hierarchical value maps. See Table 2 for an example of an individual value chain for a location based group chat feature.Table 2 Example VALUE Chain from a Participant IN Hong KongAttribute(s) [A] Location based group chatConsequence(s) [C] You don’t have be connected to certain group people, its enough to be connected to a certain place[C] Connects people or group of people who are in same place or in certain places[C] Enables broadcasting a bulleting board to a certain place or places[C] The wider the area, the closer to broadcasting, the smaller the area and closer to instant messagingValue(s) / Goal(s)[V/G] Improves the capability of an individual to communicate[V/G] Enables communication between strangers4. ResultsWe obtained a very detailed list of requirements in nearly 3500 individual statements arranged in 663 value chains. We then performed a content analysis and classification procedure to aggregate the data and construct hierarchical value maps for different service applications. In the analysis, we employed a two-step, qualitative, thematic approach to classify the data into a limited number of response categories. The thematic approach is intended to preserve the integrity of the value chains, given the idiosyncratic nature of responses to the laddering interview. Analysts interpreted the individual statements to classify them into categories, where statements with similar meanings, but using different words, were given the same label. Then they clustered the chains and sort them qualitatively into concepts. Three experienced researchers classified the data independently and then met and compared results to resolve any coding differences by consensus. Once all of the chains were sorted into themes, a hierarchical value map was constructed for each theme. In iterative rounds of sketches the analysts developed maps that aggregated the chains in each theme. The theme maps show features and attributes on the left, consequences in the middle and values on the right, linked as they were by participants in the interviews. The analysis produced six theme maps where each represents a different service concept (see Appendix 3 for a summary of service concepts, attributes, and consequences).4.1 Importance of Service AttributesConcrete attributes are characteristics designed into products that can be directly perceived (Gutman 1982, Olson and Reynolds 1983). For example, concrete attributes of mobile location-based service include detail information about destination, showing direction of travel, and permission to use tracking services. Abstract attributes are characteristics of products that may not be directly measurable or perceived through the senses (Gutman 1982, Olson and Reynolds 1983). For example, abstract attributes of mobile location-based service include ease of use, customization of groups, and rich presence description.The laddering data was grouped independently by two judges into six answer categories, based on Olson and Reynolds (1983). The data support the expectation that our approach generates a substantial number of concrete attributes. The difference in the number of concrete and abstract attributes for each city is statistically significant (see Table 3). The difference in the proportion of concrete attributes across the three cities is not statistically significant (χ²(2) = 5.07, p =.079).Table 3 Attributes and ConsequencesHelsinki Hong Kong Las VegasNumber of attributes and consequences (Centrality a ) Concrete Attributes 103 (.45) 197 (.47) 164 (.52) Abstract Attributes 14 (.06) 11 (.03) 10 (.03) Functional Consequences 95 (.81) 160 (.75) 114 (.71) Social Consequences 15 (.13) 43 (.20) 25 (.16) Personal Consequences 3 (.03) 9 (.04) 3 (.02) a Centrality is defined as the ratio of in-degrees plus out-degrees of an attribute or consequence category over thesum of all cell-entries in the implication matrix (Pieters et al 1995). Centrality ranges from 0 to 1. A higher ratio indicates a larger proportion of connections in the value hierarchy that run through the particular attribute or consequence.We examine the relative importance of the attributes using means-end implication matrices (Reynolds and Gutman 1988). Following construction of the matrices we calculate centrality statistics for each sample (Pieters et al 1995). In order to facilitate comparison across samples we examine overall importance for all abstract and concrete attributes rather than the importance of specific attributes. The centrality measures of the concrete attributes for Helsinki (0.45), Las Vegas (0.47), and Hong Kong (0.52) show that in all three samples concrete attributes are more central when discussing service value. The centrality measures of the abstract attributes are low: (0.06) for Helsinki, (0.03) for Las Vegas, and (0.03) for Hong Kong. As expected, there is a strong emphasis on concrete attributes and fewer mentions of abstract attributes.4.2 Importance of Consequences of Customer-Defined Service AttributesConsequences describe what a consumer experiences when using a product or service in a consumption context. Functional consequences represent the ability of a product or service to perform its utilitarian purposes (Holbrook 1994). For example, functional consequences resulting from the attributes of mobile service include betterperformance, ability to plan better, and a more convenient way to get information. Personal consequences represent the ability of a product to satisfy important intrinsic goals that are self-oriented and/or symbolic (Hirschman and LaBarbera 1990). For example, personal consequences resulting from the attributes of mobile service include trying out new things and avoiding information overload. Social consequences represent the ability of a product or service to portray an image to others that is congruent with the norms of significant others (Holbrook 1994). For example, social consequences resulting from the attributes of mobile service include more effective communication, exchange of knowledge, and ability to collaborate.The data supports the notion that the number of functional consequences exceeds the number of either personal or social consequences. The difference between the number of functional consequences and either personal or social consequences in each of the three cities is statistically significant (see Table 3). The difference between the three cities in the proportion of functional consequences is statistically significant (χ²(2) = 8.24, p = .016), with Las Vegas reporting fewer than expected number of functional consequences.The centrality measure of functional consequences for the Helsinki sample (0.81), Las Vegas (0.75) and Hong Kong (0.71) shows that functional consequences are more central than any other consequence category. Likewise, the centrality measures for social and personal consequences were much lower for all three cities. All three samples placed similar importance on functional, personal, and social consequences when discussing service value.4.3 Differences in Service Concepts Derived from Customer-Defined AttributesParticipants in the three cities differed substantially in their input to the six service concepts. Table 4 shows the percentage of respondents in each city with ladders connected to each of the service concepts. The difference in percentages among the three cities is statistically significant (χ²(10) = 69.38, p<.001). Clearly these results suggest that solutions based on these service concepts might be perceived differently by end users in each market. For example, a solution based on the “Group Coordination” concept might be more successful in Helsinki than in Las Vegas, while one based on the “City Guide” concept might be more successful in Hong Kong.Table4 Service Concepts by City (% Within City)Service ConceptHelsinki Hong Kong Las VegasGroup Coordination 30.1 11.5 10.0Group Communication 8.9 19.4 27.2Way Finding 13.8 7.4 6.7City Guide 15.4 36.4 17.2Travel Coordinator 13.8 8.3 18.9Shopping Assistant 17.9 17.1 20.04.5 Differences in Usage Motivation for Service ConceptsThe difference in percentages among the three cities for the four most frequently elicited values3 is statistically significant (χ²(6) = 86.43, p<.001). These results suggest that preferences for hedonic or utilitarian benefits are strongly related to the cultural and physical environment of the user. Not surprisingly, the latter not only determines preferences for service concepts but also the choice of scenarios in the definition of customer requirements.Customers who are interested in utilitarian value are concerned with obtaining service outcomes in an efficient and economic manner to achieve their goals. Hedonic value reflects the service potential entertainment and emotional value rather than the achievement of any pre-specified objective. In our multinational sample of lead users, hedonic values appear more relevant in Hong Kong and utilitarian values more relevant in Helsinki and Las Vegas. Therefore, actual features of the service need to emphasize the corresponding benefit.Local systems of innovation are defined by networks of actors directly or indirectly participating in the development of solutions (Morelli 2007). Overall, our results immediately suggest that the customer environment influences customer superordinate goals and therefore a service designed for one market might not succeed in the others. The identification of actors in the environment is critical to understand possible interactions of interests, skills, and knowledge that motivate needs for innovative solutions and influence adoption. Recall that the data for3 These are: Comfort, Economic Gains, Efficiency, and Life Enjoyment. There is not enough data to examine statistical significance for all goals.。