Freight flights from Groningen Airport Eelde: a case
study on new service development
Ernst Jacobs
August 2009
University of Groningen
Faculty of Economics and Business
MSc Business Administration
Specialization Business Development
E.J. Jacobs University of Groningen 2 of 32
Freight flights from Groningen Airport Eelde: a case
study on new service development
Author
Name: Ernst Jacobs Student Number: 1493132
E-mail: e.j.jacobs@student.rug.nl University of Groningen
Faculty: Economics and Business
Specialization: MSc Business Development 1st supervisor: dr. W.G. Biemans
2nd supervisor: dr. K.R.E. Huizingh
E.J. Jacobs University of Groningen 3 of 32
Abstract
Purpose: Groningen Airport Eelde is interested in offering freight flights from the airport. Therefore, they would like to know if the service development process currently used is suitable for the development of freight flights. Furthermore, this study tries to gain insight in NSD at smaller organizations focusing on specific service innovations (new-to-the-firm and service extension innovations).
Design/methodology/approach: Case study research at Groningen Airport Eelde, using: open interviews with employees and companies involved in the research on freight operations, observations during meetings and brainstorm sessions and
documentation on service development. This study identifies the current development process, and proposes a new service development model suitable for Groningen Airport Eelde.
Findings: New service development process is ad hoc at Groningen Airport Eelde. No business strategy for service development is being used, services are not being blueprinted, a cross-functional team is available, no formal performance measurement system is being used to test current services and services are eliminated without systematic process.
Research implications: This study contributes to the academic literature by offering a better understanding of new service development in SMEs, specifically focused on new-to-the-firm innovations and process innovations. Furthermore, this case study offers insight in the way Groningen Airport Eelde develops new services and how they can optimize their NSD process.
Research limitations: Based on one case study conducted, external validity is therefore low. New service development model based on model tested only with financial service providers.
Originality/added value: New service development process in small organization is researched specifically new-to-the-firm innovations, previous research focused on medium to large organizations. A NSD model for smaller organizations is proposed. Keywords: NSD, SME, case study, new-to-the-firm innovations and process
E.J. Jacobs University of Groningen 4 of 32
1 Introduction
Services are becoming increasingly important for the developed economies (Biemans
et al., forthcoming). They account for around 70% of the economic added value in the
European Union, are the main driver for economic growth and play an important role in the productivity growth (OECD, 2005b). Nowadays the service industry employs most of the European and U.S. workforce (Cook et al., 1999), furthermore the service industry was the only sector positively contributing to job creation in the European Union over the past decade (OECD, 2005b). The service industry gained more interest from researchers after it was clearly distinguished from products
manufacturers (i.e. Johne and Storey, 1998; Lovelock, 1982; Scheuing and Johnson, 1989; Shostack, 1984). Previously it was assumed products and services could be managed similarly (Levitt, 1972). According to Gallouj and Savona (2009) this had to do with the difficult measuring of output performance of services, due to the
characteristics of services. More recent studies indicate that there are clear differences between services and products (i.e. Johne and Storey, 1998; Jong and Vermeulen, 2003; Zeithaml et al., 1985).
While the development of products is well researched, the development of services is not (Biemans et al., forthcoming; Jong et al., 2003; Jong and Vermeulen, 2003). Several authors commented on the lack of a decent systematical process for
developing new services (Biemans et al., forthcoming; Griffin and Page, 1996; Johne and Storey, 1998; Jong et al., 2003). Furthermore, research has shown that the lack of a formal process for the development of new services could increase the failure rate (Cooper and Edgett, 1996; De Brentani, 2001; De Brentani and Ragot, 1996).
This article discusses a case study done at Groningen Airport Eelde, a regional airport in The Netherlands. The management faced the following question:
“How does Groningen Airport Eelde have to manage its service development process to offer new service innovations that differ in innovativeness from the current
E.J. Jacobs University of Groningen 5 of 32 The article uses a literature framework on new service development. First, services will shortly be discussed. Second, research on new service development is discussed. Next, an integrative NSD model is chosen for the case study and a short description of the model is given. Finally, several service innovation taxonomies are reviewed and specific small and medium enterprise (SME) issues are being discussed. The next part discusses the new service development case at Groningen Airport Eelde: the
company, methodology, conclusions and recommendations. The article will end with conclusions, implications and limitations.
This study contributes to the academic literature by offering a better understanding of new service development in SMEs, specifically focused on new-to-the-firm
innovations and process innovations and offers insight in the way a SME conducts its new service development process through a case study. Other recent studies
investigated product innovations at SMEs, or service innovations at larger organizations.
2 Services
2.1 Definition and characteristics
Various definitions are available to distinguish services. The following definition will be used in this article: ‘a service is a deed, process or a performance, rather than a thing’ (Rathmell, 1966). Biemans et al. (forthcoming:3) state that: “The purpose of a
service provider’s business processes is the creation of superior value for customers”.
They therefore define the service innovation process as “the acquisition, development
and recombination of competences to increase the value of the services offered to customers.”
E.J. Jacobs University of Groningen 6 of 32 refers to the (possible) variability in the performance of the services that are being offered (Zeithaml et al., 1985), mainly caused due to the labor intensiveness of services. Finally, services are perishable because they cannot be saved, therefore production and consumption of services has to be managed carefully (Zeithaml et al., 1985).
2.2 New Service Development
Recent studies on new service development uncovered several factors that influence the success of a new service (Avlonitis et al., 2001; Cooper and De Brentani, 1991; De Brentani, 1990; De Brentani and Cooper, 1992; De Brentani and Ragot, 1996; Froehle et al., 2000; Gebauer et al, 2008; Lievens and Moenaert, 2000; Nijhof et al., 2002). Biemans et al. (forthcoming) state that after the discovery of success factors in new service development, research was done on the way new service development is being organized in phases. Various attempts have been made to develop a normative model for service innovation; most researchers used a product development model (e.g. Booz, Allen and Hamilton’s model and Cooper’s Stage-Gate) and applied it to service development (Bowers, 1987; Johne and Storey, 1998; Scheuing and Johnson, 1989). These models are formed through theory; some of them are empirically tested (e.g. Alam and Perry, 2002; Bowers, 1987; Scheuing and Johnson, 1989), but many of them still need to be (i.e. Froehle and Roth, 2007; Gallouj, 1998; Jong et al., 2003; Jong and Vermeulen, 2003). Due to the diverse nature of services, researchers are having trouble to develop one integrative model for all services (Jong et al., 2003). There are other models developed, however these models are often focused on specific issues regarding service development: e.g. service blueprinting (Bitner et al., 2008), customer involvement (Alam, 2002; Alam and Perry, 2002; Johne and Storey, 1998), communication within teams (Lievens and Moenaert, 2000), service redesign (Berry and Lampo, 2000), service elimination (Gounaris et al., 2006), etc.
2.3 Alam and Perry’s new service development model
E.J. Jacobs University of Groningen 7 of 32 Figure 1: Alam and Perry’s (2002) NSD model
The first part, phases one to four, starts with strategic planning and concerns the development of new services outlined in a plan (Bowers, 1987). The new service development plan is derived from the firm’s marketing objective, which in turn is based on the firm’s objectives (Scheuing and Johnson, 1989). Jumping directly into idea generation without a strategy is, according to Scheuing and Johnson (1989:28) “lifting anchor without first determining the destination”. They state that a well-designed new service strategy drives and directs the entire service innovation.
E.J. Jacobs University of Groningen 8 of 32 development of new services can take place using several strategies (see table 1). Note that new services do not necessarily need to fit in only one category; it is
possible that innovations overlap multiple strategies (Den Hertog, 2000; Miles, 2008). Den Hertog’s (2000) strategies lead to the development of a new service that can be classified according to the service innovation taxonomy of Avlonitis et al. (2001). Den Hertog (2000) Avlonitis et al. (2001)
New service concept New-to-the-market service
New client interface New-to-the-firm service
New service delivery system New delivery process Technological options Service modifications
Table 1: Service innovation strategies Service line extensions
Service repositioning
Table 2: Service innovation taxonomies
Idea generation is looking for new service opportunities. Several sources could be used to come up with new ideas including clients, suppliers or the service firm self (Den Hertog, 2000; Narver et al., 2004; Scheuing and Johnson, 1989). Once ideas are generated they have to be sorted in a first selection process, this is the idea-screening phase. Screening could, for example, happen on the basis of feasibility and market potential (Scheuing and Johnson, 1989). Alam and Perry (2002) added business analysis for the screening of ideas on the basis of financial information and competitors’ service portfolio.
The second part of the model consists of design phases (phases five to seven). In phase five a team has to be gathered to turn the ideas that made it through screening into concepts; this is called the formation of a cross-functional team (Alam and Perry, 2002). Next, during the service design and process system design, the service has to be designed. In this phase the idea is becoming a concept. During this phase
E.J. Jacobs University of Groningen 9 of 32 The third part (phases eight to ten) is used to test the service and launch the actual service. Phase eight starts with testing the actual service during the service testing and pilot run phase. This phase determines the customers’ acceptance of the new service (Scheuing and Johnson, 1989). The pilot run is a check to see if the service is functioning smoothly (Scheuing and Johnson, 1989). “[The] Test marketing [phase]
examines the saleability of the service” (Scheuing and Johnson, 1989:33), customers
can be involved by giving their opinion on the marketing mix or suggest improvements (Alam and Perry, 2002). Phase ten is the commercialization,
introducing the new service into the market. Alam and Perry (2002) state that during this phase a possible trial can be conducted, including word-of-mouth from trial customers to potential customers.
Services that are being launched onto the market need to be evaluated (Gounaris et
al., 2006), evaluation can take place with a set of different measurements, including:
financial, non-financial, marketing, managerial and external pressures considerations (Avlonitis, 1984:81). Furthermore, organizations need to benchmark their services to enhance the performance and gain a competitive advantage (Francis et al., 2002). Once a service no longer meets the requirements specified by the organization, it needs to be eliminated; this has to be done systematically and before a service is no longer profitable (Avlonitis et al., 2006). The strategic elimination of services improves profitability, the attitude of the sales-force and the loyalty of clients (Avlonitis et al., 2006).
E.J. Jacobs University of Groningen 10 of 32 Alam and Perry (2002) found that the model can be used in two ways (see figure 1), one way is a linear stage-gate approach (Cooper, 1996) and the other option is combining several phases with each other for faster development. Smaller
organizations tend to use the parallel model, while larger organizations use the more linear model. The usage of a parallel model speeds up the development, thus creating a competitive advantage for the company (Alam and Perry, 2002).
2.4 Taxonomies of new service development
As previously discussed, Avlonitis et al. (2001) discovered several service innovation typologies. They found that for every type of innovation a different approach has to be taken during the development process (see table 3). Furthermore, they found that the probability of financial success for an innovation could foremost be found in the more moderate service innovations (new-to-the-firm, new delivery process, service modifications and service line extensions). However, other types of innovations are also important due to their ability to offer higher market shares, improving a company image, etc. Another study, done by Salavou and Avlonitis (2008), found that the more innovative organizations were financially more successful. This study focuses on new-to-the-firm innovations and service line extensions. The most relevant findings for these types of innovations will therefore shortly be discussed.
Focus on NSD-activities Systematic development New-to-the-market
service
Extensive idea generation and screening. Launch: limited testing
Moderate
New-to-the-firm service Limited testing High New delivery process Limited testing and
launching
High Service modifications Limited testing Limited Service line extension Limited idea generation
and screening
E.J. Jacobs University of Groningen 11 of 32 New-to-the-firm services offer an improved company image, without a positive image this type of innovation is likely to fail (Avlonitis et al., 2001). It is important to focus on the competitors offering (through intensified business analysis and marketing strategy stages). Avlonitis et al. (2001), therefore suggest using an intensified new service development process, with systematic and regular reviewing of progression. Service line extensions are an extension of services already being offered. The technical development is therefore less important. The focus is on the launch of the service; the new service has to match customer wishes and demands. Avlonitis et al. (2001) state that a formal NSD process is needed to ensure that the requirements set for the new service are met.
2.5 Innovations in SMEs
A study done by Salavou and Avlonitis (2008) discovered that SMEs could be classified in three different categories according to their innovativeness. The first category is the imitator group. The second category is the concept innovators and the third category contains the ‘true’ innovators.
Imitators Concept innovators Innovators Product newness to customer Low High Medium New product uniqueness Low Medium High Product newness to the firm Medium Medium High Table 4: Classification of SMEs (Salavou and Avlonitis, 2008)
Their results showed that the imitators mainly focused on incremental innovations (service line extensions and service repositioning), whereas the innovators used more innovative innovations (new-to-the-market services and new-to-the-firm services). The concept innovators were in between, averaging in innovativeness and
E.J. Jacobs University of Groningen 12 of 32 The next chapter will discuss the new service development process at Groningen Airport Eelde. A case study was conducted to see how the theoretical new service development process compares to the development of new services at the airport.
3 Case Study
3.1 Introduction
Groningen Airport Eelde was founded in 1931 and possesses two asphalt runways, of which one is actively used for flights. The current runways are 1800 meters long. This is too short for larger aircrafts; Groningen Airport Eelde is in the process of upgrading one runway with 700 meters. The new, 2500 meters long, runway makes it possible to accommodate larger aircrafts at the airport, making it more interesting for airlines to fly from and to Groningen Airport Eelde. With the longer runway new opportunities arise; the possibility to accommodate full freight airplanes, low-cost carriers and charter airlines using larger aircrafts that currently cannot land at Groningen Airport Eelde (with full load). Scheduled flights are becoming more attractive, due to higher capacity utilization. In 2008 Groningen Airport Eelde made a loss of 469.000 Euros (Groningen Airport Eelde, 2008). The company has 44 employees. On the airport area are several companies, such as three flight schools and the freight forwarder DSV, situated.
The current economical climate has its impact on airline companies and airports. The Dutch main airport Schiphol N.V. expects a decline from six to ten percent in freight volume and passenger movements for 2009 (Schiphol, 2008). With the recent
E.J. Jacobs University of Groningen 13 of 32 example, is earning a growing portion of its profits from the exploitation of the terminals and various real estate projects around Schiphol (Schiphol, 2008). Groningen Airport Eelde, a local airport situated in the northern part of the Netherlands, is having more trouble to earn money. This has to do with a much smaller terminal (with fewer facilities) and fewer flights from and to the airport, 61.338 flight movements in 2008 compared to 428.332 flights from and to Schiphol in 2008 (GAE, 2008; Schiphol, 2008). Groningen Airport Eelde is currently earning most of its money with the landing fee and the selling of fuel (GAE, 2008). Currently, Groningen Airport Eelde depends on the government for support due to the loss that is generated each year. Government support is ending in 2012 and Groningen Airport Eelde has to make profit from then on to ensure continuity of its operation. Groningen Airport Eelde is therefore looking for new ways to earn money. The process of
ongoing new service development is critical for growth and survival (Cooper and Edgett, 1996), and will be discussed in this case study.
The possibility for Groningen Airport Eelde to accommodate freight flights will be discussed in this article. Several conversations with parties on the freight market have led to the conclusion that there might be a possible market to enter for Groningen Airport Eelde; a consultancy firm that did qualitative analyses on the freight market in the Netherlands backed up this conclusion.
The management faced the following question:
“How does Groningen Airport Eelde have to manage its service development process to offer new service innovations that differ in innovativeness from the current
services?”
This question is assessed through a case study conducted at the airport. The current development process is outlined and improvements are suggested based on the findings.
3.2 Methodology
A case study was done at Groningen Airport Eelde, a medium sized company,
E.J. Jacobs University of Groningen 14 of 32 organization and how this can be executed successfully. Most articles only research large firms (e.g. Cooper and Edgett, 1996; De Brentani, 1991). The case study will discuss how the current organization is organized, how service innovations are currently being developed and how Groningen Airport Eelde can optimize its new service development process to offer better service experiences to its customers. Examples of the current new service development process come from recent developments (freight & passenger routes) and previous developments. The article will be concluded with a new service model adjusted to Groningen Airport Eelde. For this study, several methods of qualitative data gathering were used to gain insight into the new service development process at Groningen Airport Eelde (Gill and Johnson, 2006; van Aken et al., 2008): semi-structured interviews were held with employees and outsiders (i.e. the freight forwarders De Sammensluttede Vognmænd (DSV) and Union-Transport (UTi) and several airports), the outsiders were included on request of the airport and based on the findings by Alam and Perry (2002), Den Hertog, (2000), Narver et al. (2004) and Scheuing and Johnson (1989) who state that customer involvement improves the development process. Observation has taken place during meetings and brainstorm sessions and documentation was read. The usage of multiple sources for data gathering (triangulation) increases reliability (Gill and Johnson, 2006; van Aken et al., 2008; Yin, 2009).
For the case study carried out at Groningen Airport Eelde the integrative new service development model from Alam and Perry (2002) will be used. This model is chosen because it is empirical tested, firm size was taken into account, the model is strongly focused on customer input and it was applicable in more than one country (Alam, 2002). The results from the case study at Groningen Airport Eelde will follow the outline from this model. An adapted version of this model will be presented for Groningen Airport Eelde.
3.3 Findings at Groningen Airport Eelde
Groningen Airport Eelde uses only a small team for its daily operation (17
E.J. Jacobs University of Groningen 15 of 32 background. Research has shown (Cooper and Kleinschmidt, 1995; Griffin, 1997) that a cross-functional team improves the success of a new service. Groningen Airport Eelde develops new services mainly ad hoc, this is consistent with the theory of Alam (2002), De Brentani (1990), De Brentani and Ragot (1996) and Johne and Storey (1998) who state that smaller firms use a less formal development process. The airport uses a non-formalized approach to new service development. Several phases are combined such as the idea generation & screening (or skipped; such as strategic planning), as figure 1 shows the following phases can be combined: strategic planning and idea generation, idea screening and business analysis and personnel training and service testing and pilot run. However, the airport has no systematical process for the development and combines or skips steps at random.
Before discussing the way new services should be developed, it is important to keep in mind that Groningen Airport Eelde depends on other service providers for some services. For example, the airport alone itself does not offer scheduled passenger flights and Groningen Airport Eelde can only ask a carrier (or is asked) to operate from the airport. However, the flight in itself is not the full service provided; terminal facilities, parking, accessibility, etc are also part of the full service experienced by a customer.
Business strategy
The process of new service development is mainly ad hoc at Groningen Airport Eelde. The business strategy is expanding its current offering (service line
extensions). However, the decision to investigate freight flights does not match this strategy. Freight flights would be a service that is new to the firm (Avlonitis et al., 2001). The main sources for innovation are Groningen Airport Eelde’s competitors and legislation. Groningen Airport Eelde has a certain catchment area, where its customers are coming from; other airports within this vicinity are carefully being watched and their services are being copied if necessary. Government regulations and legislation leads to changes on the airport. For example, the current terminal is
becoming too small for the amount of passengers Groningen Airport Eelde has to accommodate. Legislation states that for a certain amount of passengers a predefined number of square meters terminal has to be available.
E.J. Jacobs University of Groningen 16 of 32 Groningen Airport Eelde uses its competitors as a source for inspiration; this matches the findings of Scheuing and Johnson (1989). Alam (2002) stressed the importance of customer involvement in this phase. Groningen Airport Eelde uses questionnaires to screen airport passengers’ satisfaction and adjust services if needed. Customer involvement improves the idea generation, making it more effective and the service designed will better fit customer requirements (Narver et al., 2004). Furthermore, Groningen Airport Eelde uses brainstorm sessions with customers and outsiders (such as the chamber of commerce, northern investment organization (NOM) and involved companies) to come up with new ideas. The more ideas are generated, the greater the chance will be that one of these ideas will become a success (Johne and Storey, 1998).
Idea screening
Most ideas generated at Groningen Airport Eelde are partially screened because they are an extension of the services already offered (i.e. offering passenger flights to Grand Canary instead of Barcelona). Freight flights are screened differently due to the fact that they are a service that is new to the airport. Groningen Airport Eelde has had some experience with freight flights and has limited knowledge on how to offer this service. To gain insight into the market potential of freight flights, the airport conducted several conversations with freight forwarders and carriers. These
conversations led Groningen Airport Eelde to believe that offering freight flights from the airport could be beneficial. Involving customers to screen ideas for feasibility matches the findings in the literature (Alam, 2007; Alam and Perry, 2002; De Brentani and Ragot, 1996). Furthermore, the airport had to check whether facilities are available (i.e. fork truck for loading the plane, drop-off point for goods) and if freight flights do not interfere with the current operations (i.e. flight schedules, delays on check-in).
Business Analysis
E.J. Jacobs University of Groningen 17 of 32 Cooper and Edgett (1996) that business analysis should focus on the screening of financial data for successful new service development.
Formulation of a cross-functional team
The team that selects ideas consists of five members. Three have a background in economics/marketing and two have a technical background. Cooper and Kleinschmidt (1995) and Griffin and Page (1996) stated that a team should be cross-functional to successfully develop new services as is the case at Groningen Airport Eelde. The team is balanced and not dominated by one department, furthermore is the team labeled as a ‘core’ team according to Cooper and Kleinschmidt (1995) because they are responsible from the beginning to the end of the project. The team is neither marketing nor operations dominated, which could lead to biased decisions in the development process (Johne and Storey, 1998). Only one team for selecting ideas is available. Due to the limited amount of staff at Groningen Airport Eelde the team cannot be changed. There is a drawback, as found by Story et al. (2000), in having only one small team available for development. When multiple projects are being developed, conflicting priorities between members can occur. Even though the cross-functional team is only small at Groningen Airport Eelde, the development of services has not led to any conflicts within the team. The project leader has a strong drive, which according to Cooper and De Brentani (1991) and Cooper and Kleinschmidt (1995) leads to fewer conflicts between team members.
The cross-functional team communicates within the organization and with outsiders. Internal communication is within the project team and the rest of the organization, due to the small size of Groningen Airport Eelde no communication problems were noticed. Employees meet regularly and the office is small enough to maintain high visibility. External communication is of great importance because Groningen Airport Eelde depends on other companies for the delivery of many services, including freight flights. These external communications with other companies are used to gather information from prospective customers for the development of freight operations and other new services. Lievens and Moenaert (2000) propose the use of front-line
E.J. Jacobs University of Groningen 18 of 32 indirectly gathers data from several companies in the Northern-Netherlands that use airfreight.
Service design and process system design
Groningen Airport Eelde is currently in the design phase for the development of freight flights. The new development process is made visible using examples from passenger flight services. Passenger flights are offered with airlines; Groningen Airport Eelde offers the facilities such as parking, maintenance, restaurant, terminal, customs and runways. Other organizations fulfill parts of the complete service. For instance, SIG Groundservice does the luggage handling, after the customer checks-in they transport the luggage to the airplane. Groningen Airport Eelde does not blueprint its services, however several authors suggest the usage of blueprints to deliver better services (Bitner et al., 2008; Shostack, 1984). To come up with a service design, Groningen Airport Eelde uses its competitors for the concept development. For example, Groningen Airport Eelde is planning a visit to several airports that offer freight flights, looking for the ‘best-in-class’ airports and try to copy the service if it is successful at the visited airport. Groningen Airport Eelde gains access to these
airports because they don’t serve the same customers and are therefore no direct competitors.
Personnel training
The airport personnel are not familiar with frequent freight operations. To gain insight into the freight market, Groningen Airport Eelde consulted several organizations and consultancy firms. The training of employees to offer the new service to customers is important for the success of a service. Training ensures a constant quality in service delivery, this is important due to the uniqueness of services (Scheuing and Johnson, 1989). The marketing and sales department sells unique services to every airline. This process is therefore not standardized as suggested by Scheuing and Johnson (1989). However, once the airport possesses a flight route, it will try to sell the route to tour operators. This is a standardized process in which the personnel are being trained.
Service testing and pilot run
E.J. Jacobs University of Groningen 19 of 32 transportation of goods and passengers, freight forwarders for the pick up and
delivery of goods and SIG Groundservice for the handling of the goods. Groningen Airport Eelde is unaware of the fact that the customer often sees the complete (service) experience and not the parts it consists of. For example, if a courier fails to pick up a package for shipment and delivery is delayed the entire service fails in the eyes of the customer, not the courier. If services somehow fail, they have to be recovered to keep the customer satisfied (Tax et al., 2006).
Test marketing
Groningen Airport Eelde has some experience with freight operations. The experience gathered with these operations is used to market frequent freight flights. Furthermore, the conversations with freight forwarders (DSV,UTi) made Groningen Airport Eelde aware of the marketing mix needed to promote their freight operations. Alam and Perry (2002) stated that using customers helps to determine the marketing mix needed for commercialization and leads to feedback to do some last-minute improvements to the service. Passenger flights are not tested, due to the dependency on other
companies. However, the skipping of the service testing and pilot run is not advised in the literature (Cooper and Edgett, 1996; De Brentani, 1994).
Commercialization
After the service is approved, it needs to be launched onto the market (Scheuing and Johnson, 1989). Groningen Airport Eelde is planning to market their freight flights in the same manner as their passenger flights. The airport is aware of its unique selling points (easy to reach, quick freight / passenger handling, no delays and affordable) and tries to use these to attract customers for its services. The services that are being offered at Groningen Airport Eelde are not systematically benchmarked and measured on a predefined set of criteria as stated by Avlonitis (1984), if services somehow fail to achieve to perform as defined, they should be eliminated (Gounaris et al., 2006). Currently services are removed ad hoc at Groningen Airport Eelde, and these decisions are only based on financial performance.
3.4 Case conclusions
E.J. Jacobs University of Groningen 20 of 32 Groningen Airport Eelde uses no formal development process. Services are being developed ad hoc and the lack of a formal process makes the development process blurry and without direction. There is no clear strategy on what services should be developed, the lack of a service portfolio is making it difficult to decide what services should be developed. Services are being developed when needed, mainly initiated by legislation and competitors offerings. Freight flights are offered because other airports offer them too. A formal, though not bureaucratic, development process improves the financial success of a SME.
A large amount of the services that are offered or can be offered are partnerships. This makes Groningen Airport Eelde more vulnerable in case of service failures. Freight flights will be offered with at least three partners (carrier, freight forwarder and freight handler) to ensure proper functioning of the service. Customers only
experience the full services, and make no distinction on who is offering which part of the service. If a service fails Groningen Airport Eelde is dependent on the partner to recover the failure. The lack of a formal service recovery plan makes the airport vulnerable when a service needs to be recovered (which can lead to image loss and financial losses).
The services being offered are not blueprinted. This makes the development of services less transparent and limitations of the services being developed could be missed. Blueprinting is even more important in the case of Groningen Airport Eelde’s freight service due to the dependency on third parties. Blueprinting also limits the need for service adjustments.
E.J. Jacobs University of Groningen 21 of 32
3.5 Recommendations for Groningen Airport Eelde
Groningen Airport Eelde needs to build a service portfolio and look for services that fit the business strategy and portfolio (i.e. bubble diagram and strategic buckets). Groningen Airport Eelde currently uses a ‘grab what you can get’ approach. A well-balanced portfolio ensures continuity for Groningen Airport Eelde. Portfolio
management encompasses the creation of a well-balanced portfolio with the
differentiation of services based on; risks, investments, added value and fit with the business strategy (Cooper et al., 1999; De Brentani and Ragot, 1996). This results in services that differ in innovativeness, ensuring financial gains and the spreading of risks.
Customer wishes at the airport are currently only researched with methods that obtain expressed needs, not latent needs. According to Narver et al. (2004) the customer orientation has to be proactive through, for example; observations, monitoring customer complaints and working with lead users (Von Hippel, 1986). Fulfilling customer requirements in the best possible way ensures that newly developed
E.J. Jacobs University of Groningen 22 of 32 service delivery; it is advised to screen the services regularly for interruptions or failures (Bitner et al., 2008).
The freight service being launched should be tested with customers. Several authors advise to use customer co-operation during this phase (i.e. Alam, 2002; Alam and Perry, 2002; Scheuing and Johnson, 1989). For the freight operations at the airport, Groningen Airport Eelde could invite some potential customers to test the service offered. The most important part will be the service testing before the actual transportation of goods; the transportation itself is not new for the carrier. The first customers could help as a word-of-mouth marketing instrument, if they are pleased with the service. Therefore, it is important not to skip the service testing and pilot run. After the commercialization Groningen Airport Eelde has to eliminate services that do not perform as expected. This can be done through benchmarking and performance measurement tools (Avlonitis, 1984). Benchmarking can also help to find partners that perform at least on par for the service delivery (Francis et al., 2002). Performance measurement and benchmarking have to be done on a regular basis, which is also stressed by several authors (Cooper and Edgett, 1996; Jiménez-Zarco et al., 2006). These recommendations lead to a more structured – not bureaucratic - approach on new service development; therefore an integrative model structuring the process is being discussed below.
E.J. Jacobs University of Groningen 23 of 32 When developing new services, Groningen Airport Eelde should focus on what type of innovation they are working on. When they want to offer a new-to-the-firm service they should focus on the business analysis and test marketing, while a service line extension requires an extensive commercialization phase (Avlonitis et al., 2001).
Test marketing
Service portfolio Idea generation, Idea
screening & Business analysis
Service design and process system design
Personnel training & Service testing and pilot run
Strategic planning
Commercialization
Evaluation
Elimination Recovery
E.J. Jacobs University of Groningen 24 of 32
4 Conclusions, limitations and implications
4.1 Conclusions
The literature on new service development models is limited. Many integrative
models are based on a sequential (stage-gate) approach. Furthermore, most models are only tested in a financial service environment with larger firms. The case study at Groningen Airport Eelde showed that a smaller organization used a less formal approach for the development of its services. This is consistent with the findings of De Brentani and Ragot (1996), Griffin (1997), Johne and Storey (1998) and Scheuing and Johnson (1989). Many smaller organizations tend to react faster to a competitors offering and therefore use a less formal approach. Alam and Perry (2002) introduced the parallel phases in their model to speed up the development process. However, several researchers found that a formal development process increases the chance of success for a new service. This places SMEs in a paradox: develop services quickly to meet competitors offerings, or slowly and more formal but with a higher chance of success.
During the case study, Groningen Airport Eelde was developing its freight service. The development process of the freight operations was not different from any of the other services developed. This differs from research done on innovations, stating that more innovative innovations need a different approach compared to process
innovations. The proposed new service development model is applicable to all new services, however the focus per type of service innovation needs to differ.
Due to the dependency on other organizations, smaller firms need to cooperate more extensively. Cooperation makes the development process more uncertain, where it is expected that service blueprinting could reduce the uncertainty. Neither Groningen Airport Eelde nor its partners used service blueprinting-techniques to optimize the services offered.
E.J. Jacobs University of Groningen 25 of 32 always the same. The proposed new service development model therefore lacks the selection of a cross-functional team phase.
The model from Alam and Perry (2002) ends after the commercialization (many of the Booz Allen Hamilton and Cooper-based models do), however several authors stress the importance of evaluating and benchmarking services (i.e. Avlonitis, 1984; Cooper et al., 1999). Furthermore, Biemans et al. (forthcoming:3) state that: “The
purpose of a service provider’s business processes is the creation of superior value for customers”. To offer superior value the organization needs to know how it is
performing its services and if they meet (or exceed) the customer expectations. The new service development model for Groningen Airport Eelde therefore includes an evaluation phase.
4.2 Limitations and implications
The results and recommendations for Groningen Airport Eelde are mainly based on the development of freight and passenger operations. Therefore a different approach to developing other services may be taken. New services that are only extensions of what is currently being offered can possibly be developed more quickly by skipping steps in the proposed new service development model or through simplified go/kill decisions.
The new service development model used was based on empirical research with financial institutions. Future research should test if the model proposed by Alam and Perry (2002) is applicable to other service industries and smaller organizations. The proposed model for Groningen Airport Eelde is not empirically tested.
E.J. Jacobs University of Groningen 26 of 32
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