May 20, 2010

Product and Service Innovation - McDonald's & Oatmeal

CNBC reports on the product development cycle at McDonald's (you may have to watch a commercial first, also, don't bother watching past 2:40 unless you like watch talking heads....):

The video states that McDonald's starts with 1,800 new product ideas but less than 5 that make it into the 14,000 stores in the US. The oatmeal that is being tested was in development for over 2 years and it is still not done. Why did it take so long?

Chef says: "Trying to find out how this fits in our operations. It's not real until it is real in our restaurants."

Yeah!!! Strike one up for operations management!   I wish there were more details, but I imagine the challenges of introducing a new product into McDonald's are similar to introducing a new product onto the shop floor of a manufacturing plant: a new procedure has to be created that is simple enough that an unskilled16 year old can do it efficiently, effectively, and consistently.  Additionally, McDonald's does not have the luxury of adding additional space to accommodate new production lines, so where the procure will happen is also an issue.  

To top it off, the chef mentioned that McDonald's supply chain representatives have to give the thumbs up on the recipes.  Clearly McDonald's has to consider the demand for new products and what that means for the supply chain.  Since McDonald's is has such a large footprint, a new product launch may very well stress the supply chain of a certain ingredient.  Last year I meet with a representative of Darden Restaurants and they mentioned that when Red Lobster puts crabs on sale, they have to be prepared to essentially capture the world wide crab supply  in order to meet the demand.

Maybe oatmeal will be hard to come by soon...?  

May 17, 2010

New book in the mail

I just got a new book in the mail:

Tony Hsieh, the CEO of Zappos sent me his book to review.  An pre-released version to review.  Because I'm a blogger.  How cool is that.  I feel a little bad because I'm pretty sure that the only people who read my blog is my mother-in-law and my adviser, but now I'm official.

Zappos happens to be one of my favorite companies of all time. Last month I led a discussion of a Harvard Business Case about Zappos.  During the class I showed a couple of commercials and we discussed the experience that Zappos is able to create even though they just an online retailer.  The experience is largely driven by the culture of the company and the speed and level of service that they provide.

To demonstrate their service in class I searched for some shoes online and found some that the class agreed I should buy, unknown to them I had already bought them.  I ordered the shoes two days before the class at 5:30 pm.  They arrived at my door the next morning at 11:00 am.  I showed them the UPS tracking and the emails that Zappos sent.  Finally, we opened the box of shoes in class and a class member recorded it.   Before watching it, you may have to watch the above commercials to understand what is spewing out of the box and why I do a little strange box dance at the end. It is a bit hard to hear too, but I don't really say anything important.

If you have made it this long in the post, all that is left for you is to leave a comment.  One lucky commenter will win the OTHER copy of the Delivering Happiness that Tony sent me.  That's right, because I'm a big time blogger Tony sent me 2 copies, one to read and one to give away on my site.  Given I have only had one comment on any blog post prior, you might have a real good chance of winning a free book - so leave a comment.  Actually, you could leave a comment on any post you want and I'll count it toward the free book give away contest.  The more you comment, the more chances you have to win - oh boy!

Also, I'll post my review of the book in a few weeks.  I'm excited to read it!

May 15, 2010

Sequence of an Experience: has recently updated some of its features one of which really caught my eye:

As the video explains, this "heat map" tracks the popularity of small segments within each show.  The video shows the heat map against an episode of Fox's Glee.  With a closer look, there are three times that the popularity increases.  The highest point of popularity is the first of the three and the last high spot is very near the end of the episode. The sequence of popularity shown in this one episode by the heat map follows closely to some service design theory, psychology and behavioral economics research, as well as my own dissertation research; mainly that the sequence of the popularity (or utility, pleasure, pain, etc) in an experience significantly impacts customer experience.  We can illustrate four guiding principles of experience sequencing  from the heat map in this one episode:
  1.  Peak Effects  -  we cannot remember everything that happens to us, so we rely instead on remembering the high and low points.  An experience without a high point may not be an experience at all.
  2. End Effects - we tend to remember how things end better than in any other point in an experience.  Fortunately for this episode, the end was also a high point.
  3. Trend Effects - an experience that continually improves feels better than one the starts great but just gets worse.
  4. Spread Effects - we prefer to experience several high point spread out over time as opposed to all at once, so if there are several high points, we might do well to spread them out across the experience. 

I could go on for quite a while on this topic (it is my dissertation topic) so I was excited to see it in action.  This is a relatively untested area in service/experience design, but the idea is that in considering the flow of an experience, sequences patterns that follow the four principles above should improve customer experience.  

If you would like to read an academic article that I wrote you can see it here.  We find evidence that the four sequence effects impacts repurchases of performing arts season subscription sales.  I also suggest reading Chase and Dasu 2001 "Want to perfect your company's service? Use behavioral science" a Harvard Business Review article in which the ideas of sequence are introduced in service design.

On a final not (plea), if you know of anyone who knows someone who works at, please connect me.  I have some ideas about what their data can do to firm up and expand theory on this subject.

May 12, 2010

Pre-paid Restaurant

Arriving soon in Chicago, check out this trailer for a new restaurant:

Hat tip to The Operations Room

There are several interesting ideas about this concept and I encourage you to read what The Operations Rooms (link above) has to say about it.  The basic concept is that the restaruant will charge "fares" similiar to what an airline might charge.  Different fares will be charged for different times and days allowing for a better controll of demand. 

What I find interesting is that the sequence of a the restaurant experience is quite different with this concept, mainly that the payment for the meal is conducted well before the meal.  Research in marketing and psycology says that paying for a good or service is often the most painful aspect of a transaction because the customer has to give up their hard earned cash. Similiarly, in pain realted literature researchers show that medical procedures that end with high levels of pain (peak pain) are rated mcuh more painful by patients compared to rating for patients whose peak pain was not near the end of the procedure.  In one experiement, the end of a colonoscoply was artificaily prolonged to prove that by by ending further from a peak pain, overall pain would decrease. 

So, by move the peak pain (payment) further away from the end, will this concept see an improved service experience?  I just need to convice them to randomly make some people prepay and other pay at the end and maybe we'll find out....

Service Design Innovation - Disney Edition

This video is worth watching.

Disney continues to be on the forefront of creating interactive experiences. Magic play floor, undersea magic restaurant - eating with "Crush",  virtual portholes, enchanted art all take aspects of the aesthetic or environment design and turn them into something that adds to the experience.  With the virtual port hole they are able to take an undesirable room and make it popular.  The art is more than just a picture on the wall, it is a game.  The wall at the restaurant is alive.

Anybody up for a cruise?

Self Service Technology & Customization - Coca-Cola Edition

The Wall Street Journal recently reported that Coke is testing out a new fountain machine that allows customers to mix their own drink:

"Coke's new Freestyle machine is housed in a curved metal shell created by the designers of Ferrari race cars, and features a touch-screen menu. Inside, technology common in measuring tiny doses of chemotherapy drugs is used to release digitally-controlled amounts of concentrate flavor from dozens of plastic cartridges."

"A regular soda fountain combines carbonated water and flavored syrup in a mixing chamber, and pours the mixed drink out through a designated spigot. But the Freestyle has just one nozzle. The machine pours carbonated water through the center of the nozzle, then shoots streams of flavor into the falling water, such as lime oil and Diet Coke syrup, so that the drink is mixed in the air."

They have been running a test market and have found that it takes a bit of customer training to keep the lines from backing up, but that both sales and revenues are up.  Service researchers have often pointed out that if you create something for your customers to use that is more complicated than what your employees use, expect trouble.  For example, the self service check-out line forces shoppers to play the role of security by making sure everything you buy is on the scale after you bag it - employed checkers don't have to do this so why make customer do it?

On the other hand, this self-service  has an element of customization that customer might find appealing.  If I can make my caffeine-free-cherry-vanilla-Dr. Pepper I'll be happy.  Allowing the customers to create their own drink provides sense of ownership and control.

 The other part about the machine that is interesting is that it wireless sends information about usage back to Coke where they are able to analyze time series demand data.  Coke will be able to see when people drink what and how much.  They will be able to tell what type of flavoring is most popular and in what combinations. 

It seems to me that the technology is a bit too much... We used to do something similar when, as kids, we rode our bikes to the local gas station on a hot summer day.  We would take the big fountain cups and mix some of each flavor.  We called it the "suicide" - I'm not sure why.  Sometimes we even dropped smarties into the concoction and watch them fizz.  Now days, I often see extra flavorings next to the fountain drinks (vanilla, cherry, raspberry, etc.) that can be pumped into the drink.  Is there nothing new to what Coke is offering?