Business services are a category of business activity that supports businesses but does not produce a physical commodity. Examples of these services include information technology, shipping and procurement.
In many cases, service businesses are more difficult to manage than product companies because they are often more abstract and involve less tangible assets. As a result, managers have to undergo an important shift in their perspective when it comes to designing and developing a service business.
The first step in creating a successful service business is to understand the characteristics that customers will value when choosing a provider. Managers can use this insight to create offerings that meet their customer’s needs and desires, thereby enhancing their brands and increasing revenue.
For example, a fast-food restaurant might want to offer convenience and friendly interaction to attract more customers. The company might also want to develop an experience that allows customers to easily find and interact with staff.
Another way that service businesses are different from product companies is that they typically do not have the luxury of economies of scale. Instead, their production and distribution processes are decentralized, often to a local level. This can reduce opportunities for developing economies of scale, but can also be beneficial when it comes to delivering a high quality service.
Service-oriented business management is a key part of our core teaching module at Harvard Business School. In the course, students learn about a framework for managing a service business that separates the basic elements of a service from those of a product.
1. Product-oriented image
The predominant mental image about “the way things work” in business is a product-oriented one, which limits the ways that managers can communicate about and develop innovative approaches to managing their service businesses.
2. Service-oriented language
The language of the service business is more abstract than that of a product business, which can make it harder for managers to communicate about their services. For example, a business might describe its management consulting services as “helping clients get the most from their resources,” but this could be confusing to someone who has never hired a management consultant and has no idea what the process of consulting is all about.
3. The need to be flexible
A business needs to be able to adapt quickly in order to serve customers well. This can be especially true for a business that is rapidly growing, as it may need to adjust its operations to support increased demand for services.
4. The role of the customer is critical to a successful service-business model
A customer’s input is crucial to a successful service-business model, and they have a significant influence on both the costs and quality of a company’s services. For instance, if a company’s employees are not interacting with customers as efficiently as possible, it can cause a lag in service delivery that results in lost sales and profits.
5. The importance of the service-providing industry supersector
A service-providing industry supersector includes all industries that provide services to customers. They include the professional and business services supersector, which provides a broad range of services to businesses. These services are sold to both businesses and individuals, including legal and accounting services, IT support, and transportation.