Service-oriented companies have risen to prominence as the world’s main economies have aged. But many of the management techniques and approaches used to learn more about services managers were created to deal with problems encountered by product businesses. Are these good enough, or do we need new ones?
I’d like to propose that new equipment is required. Whether a company is launching a highly complex item like a digital camera or a basic commodity like maize, it must develop a product that is both enticing in and of itself and have a workforce that can produce it at a competitive price.
Both jobs are undoubtedly difficult to perform properly; a great deal of managerial attention and academic research has been devoted to these difficulties. Delivering a service involves more than just providing the product; it also involves managing the clients who may play a key role in its creation. Additionally, service organizations must come up with creative ways to finance their competitive advantages because the involvement of consumers in the production process can have a negative effect on prices.
A service business could fail because of any one of these four components, including the offering or its finance source, the personnel management system, or the customer management system. My research of service organizations that have had difficulty over the previous ten years provides ample evidence of this. But it’s also obvious that there isn’t one certain way to put the pieces together. Depending on the other three, any one of them may not have the best design.
A service business could fail for any one of these four reasons: the offering, its funding source, the system for managing employees, or the system for managing customers. My analysis of service businesses that have had difficulty over the past ten years serves as a powerful illustration of this. There is no “correct” way to combine the ingredients, which is also obvious. Each of them has a proper design that depends on the other three. When we examine service organizations that have developed and thrived—companies like Wal-Mart in retail, Commerce Bank in banking, and the Cleveland Clinic in healthcare – the effectiveness of their integration of the various components stands out more than the cleverness of any individual component alone.
Based on these four essential components, which are commonly referred to as the “service model,” this article describes a strategy for creating a successful service business. This strategy acknowledges the distinctions between service firms and product businesses and was developed as a fundamental teaching module at Harvard Business School. In my course, students gain the ability to consider these variations and how they may affect managerial practice. Above all, they discover that in order to create a great service company, managers must bring the fundamental components of service design together, failing which they run the risk of tearing the company apart.
1. What is being offered
The challenge in running a service-based organization starts with design. Like with product firms, if the offering itself has fatal defects, the service provider won’t last very long. It must be able to satisfactorily satisfy the demands and wants of a desired clientele. However, managers must adopt a fundamental perspective shift while thinking about the service’s design: Instead of prioritizing features that consumers will appreciate, service designers do better when they focus on the experiences that customers want to have. Customers may associate your service brand with comfort or cordial conversation, for example.
In comparison with your competitors, you may offer extended hours, closer proximity, a broader scope, or lower prices, which may make them prefer your offering. In order for the business to compete effectively, the management team must be clear about what attributes will make it stand out from the competition.
What a company decides not to do is frequently used to determine strategy. Similarly, what a company decides not to perform well might be characterized as service excellence. It should sound odd if I say this. We don’t frequently suggest that achieving excellence requires putting in subpar work.
The majority of successful businesses, however, decide to deliver a portion of that package poorly because service businesses typically do not have the option of simply not providing some aspects of their service – every physical store, for instance, must have employees on-site, even if they are not particularly skilled or numerous. They don’t pick this option at random. Instead, as my research has demonstrated, people underperform in certain areas in order to succeed in others. This could be regarded as a hard-coded trade-off.
Consider a business that can afford to operate for a longer period of time because it charges more than its rivals. This company performs admirably in terms of convenience but poorly in terms of price. Service is fueled by the pricing dimension.
What a company decides not to do well is what might be characterized as service excellence.
Managers must choose which traits to focus on for superior performance and which to focus on for subpar performance in order to develop a successful service offering. The needs of the clients should substantially influence these decisions.