Operational loss and new service design

Abstract

PurposeThe understanding of operational failure (or loss generally) and its role as an imperative for service design is underdeveloped. This paper investigates external and internal loss categories (such as market failure, and unexploited resource development) and their relationship to the loss response; specifically, reactions to loss in the form of ex post loss control via new service design (NSD).Design/methodology/approachThe investigation consists of complimentary theoretical and empirical dimensions and includes the analysis of five service design cases. This analysis deploys a model based upon the extant service design and innovation, resource‐based view and operational risk literatures.FindingsThe findings question the universal applicability of extant normative and descriptive models of service design. After arguing that their use should be limited to specific contexts, the paper proposes a new, more general conception of service design modes.Originality/valueThe paper comments on patterns of service design practice not discussed previously. It highlights some dangers inherent in following conventional prescription on design processes, illustrates a positive role for loss in design, and proposes new frameworks for NSD that accommodate loss as a contributor to the process.