Business services offer intangible, non-physical products that consumers and businesses require. These include everything from accounting and consulting to marketing and IT services. Service-based businesses are much more common than product-based companies because they tend to be less capital intensive. However, they do face unique challenges that require different skills than those used in product-based companies.
The most fundamental difference between a service-based and a product-based company is the role that customers play in operational processes. In a service environment, customer behaviors can significantly impact the quality of delivered services and the costs of providing those services. For example, if one customer at a fast food counter dithers over decisions, it can slow the service for all customers behind him. This can significantly affect the success of a service-based business, because it can detract from both the experience of individual customers and the overall profitability of the system.
Because the customer is so integral to service-based operations, the management of a service company must take on a new dimension. In addition to the usual tasks of ensuring that revenue-generating lines of business are performing well, managers must focus on designing service models and coordinating service activities within those models. To do so, managers must understand and embrace the concept of service design, which differs from the traditional product-design thinking that is common in most business schools.
Creating and maintaining a successful service-based business requires that managers get four things right, or risk pulling the company apart:
1. The design of service systems.
The service design process starts with understanding the needs and wants of attractive target markets. This includes examining demographic and behavioral trends, analyzing competitive offerings, and developing an understanding of the value of service to the customer. It also involves the creation of a service blueprint, which describes the activities that will be performed in order to deliver the desired experience.
2. Recruiting and training employees.
It’s important to have the best talent in a service-based business. Employees need to be well-trained, friendly and professional in order to provide exceptional service. This can be accomplished through training programs, a good hiring process, and incentives that reward excellent performance.
3. Managing employee turnover.
Service businesses typically have high turnover rates. Recruiting and training new employees can be a challenge, especially for specialized roles. Managers can reduce turnover by fostering a positive work culture, offering flexible schedules and encouraging employee collaboration and innovation.