24. September 2009 by Aidan.

I have set up a “Service Design & Innovation - Ireland” group on Linkedin.

Here is the overview from the Linkedin page:

There is a growing international reliance on design in the race to develop radically new, innovative, service offerings.
The demands for Service Innovation are highlighting the need for the practical application of Service Design and Product Servitization techniques.
Ireland is well positioned to play a leading role in the world in these areas however there is no cohesive approach being taken in Ireland to ensure that the experts in these fields are working together towards a common goal.
This group offers practitioners and other interested parties the opportunity to connect and start the discussion about how to move this forward and tap into the opportunities that exist today.

I am looking forward to having interested people join this forum with a view to improving Ireland’s overall standing in the areas of service design and innovation, before it’s too late!

Here is a link to the group page. 

Aidan

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20. September 2009 by Aidan.

The term “service” is used everyday is discussions about business activities and performance. At times it can be confusing because of the lack of definition in exactly what is meant by the term “service”. In fact, when discussing service it is very important that the context is understood.

There are two main areas of service that are unique and distinct and need to be understood. One helpful way of considering these are as the “service that you provide” and the “services that you offer”.

The “service you provide” covers the interaction of your business with everyone else. It can be the interaction with your customers primarily, but also with your suppliers and your own employees. Every company provides this service by the very nature of being in business (you sell something and you charge for it, you talk to your customers, etc). Anyone who interacts with your company experiences the “service your provide”. To improve customer satisfaction you need to ensure that the level of service you provide is of high quality, responsive and meets your customers needs. Service Design is increasingly being employed to optimise this process and ensure that your service meets or exceeds customer expectations. Essentially, the provision of this service is a cost for your company however the quality of this service can be a differentiator for your business.

The “services you offer” are completely different. These are closer to the product you sell. Essentially they are value added or essential services that you need to actively provide in order to grow your business. In this case it will often be the customers choice whether or not to choose to purchase your service.  These services are value added for your business and can substantially grow your revenue and develop longer term customer relationships. It is critical that these services are designed from the outset and not just drifted into, this is being addressed by the growing field of servitization.

For many companies there can easily be confusion between the service you provide and the services that you offer. These need to be considered as two separate aspects of service (”service” V’s “services”) and there are emerging design techniques and tools that can optimise both.

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22. June 2009 by Aidan.

You wouldn’t launch a product without knowing how you are going to pay for it. However all too often companies start to offer services without giving a lot of thought to the funding mechanism.

Here are 5 ways to fund the services that you offer:

1. Bundle the cost of the service in with the product. This is one of the most common methods for product manufacturers and is essentially the warranty that you offer. However you need to know what the warranty is going to cost you so that you can ensure the product price covers this additional cost. If you don’t have a product sale to fund the service then you need to consider one of the following:
2. Charge customers for the service. This is the direct revenue model, you provide the service and the customer pays for it. Sounds easy, however it can be difficult to determine the right price for the service. To remain in business for the long term you need to sell your services for a price that is fair and palatable for your customers. You can rip them off once but they won’t give you a second chance. Benchmark yourself against what is a reasonable price for the market you are in and what your competitors charge. You don’t have to charge the same, it can be more or less, but you do need to be able to tell people why it is different.
3. Service delivery is a two way street and relies on interaction and effort from both the service provider and the customer. Since the effort required from each side will influence the cost why not see if the customer can take over more of the work from you. It will allow you to reduce the cost of providing the service, which is one way to fund it! If you are really good, you can charge the customer for training them on how to serve themselves…:)
4. Review your process for service delivery to determine where you can remove steps from it. This can have two big benefits. Every step you can remove from the service delivery process will reduce your operating costs and get the service to the customer quicker…a winner for both sides.
5. Look at the long term. Are there investments (hardware, software, staff training, etc.) that you can make now that will reduce your costs in delivering the service in the long term. Spend now to save later.

  These tips give you some ideas to look at when you are designing your service offerings, and that is the time when you should be examining how to fund your service. Service excellence is not cheap and someone has to pay for it.

There is of course a 6th tip, but that’s called Charity…..

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15. May 2009 by Aidan.

Why is it important for product manufacturers to offer services in addition to their products ?

1. Services can provide an alternative revenue stream for your business.
2. By delivering services you are brought closer to your customers and you move from a transactional relationship to a long term ongoing relationship with your customer.
3. By working more closely with your customers you can more easily identify their unmet needs and this allows you to develop new or expanded service and product offerings.
4. Adding services to your portfolio of offerings can drive you into other markets that you may have been missing with just product offerings.
5. Manufacturing will eventually migrate to the lowest cost location but service delivery is localised around your customers and is not easy to replicate from remote locations. It can offer protection from off-shoring. 
6. The content, quality and speed of your services offerings gives you multiple opportunities to differentiate yourself from competitors.
7. The service you are providing can fill core competency gaps for your customers. Many customers are looking to outsource activities that are not aligned with their core competencies. You are the expert in your product so you are best positioned to offer superior services that relate to it.
8. Services can be tailored to meet the needs to different customer segments and your back-office can easily support multiple customer segments. Turn some of your cost centres into revenue generators.
9. You need to start offering services because your competitors are going to. Just make sure you are better at it than they are.
10. You are already offering services (e.g. warranty, repair, order handling) you just need to make the strategic decision to design and sell enhanced service offerings.

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15. May 2009 by Aidan.

Hilti is one of the world’s leading tool manufacturers who’s motto is “to passionately create enthusiastic customers”.  

As they go about this, they ensure that they are constantly innovating their products and now innovating the services that they offer also.

Hilti has introduced a “Fleet Management” program that allows customers to purchase the capabilities that their tools can deliver rather than having to buy the tools themselves. As Hilti Chairman Dr. Pius Baschera said in a recent interview, their customers can “buy the holes they have to drill instead of the drill”.

Hilti’s history of innovation and close contacts with their customers helped them identify an unmet need. This was that the management of the tools that they sell is not one of their customers core competencies. As a result they developed their Fleet management program to help customers manage their tool fleet.  Under this program the customer does not have to worry about broken or obsolete tools. The customer simply pays Hilti a monthly fee.

This could be a high risk strategy because Hilti is accepting a lot of the risk in this program however they believe that they can do it because of two key factors. One is their belief in the quality of their products and the other is their close direct relationship with their customers. By being in control of everything from the manufacturing of the tools through to the final customer, Hilti can adequately manage the risk that they are taking.

The introduction of the program led to changes in how their Sales and Marketing staff worked. Now, instead of selling tools, their sales people are effectively selling a financial concept. In addition, they had to ensure that their service and logistic operations were running effectively in order to minimise their costs.

The program has been very successful for Hilti to date, with some markets selling 50% of their tools through the Fleet Management program. It is a great example of the servitization of products to enhance value for the customer and for the product manufacturer.

You can read more about it here.

Posted in Servitize, Selling "Services", Customer Service, innovation, General | 1 Comment »

21. April 2009 by Aidan.

David Mountain and Hernan Saenz have written a good article on Streamlining Support Services for Cost Reduction.  

When cost reduction is an urgent requirement, companies usually start looking at their G&A (General and Administrative) expenses before touching front line staff. If you have to reduce G&A expenses then you need to do so in a way that will have minimal or no impact on the service level that you provide to customers.

A typical approach to this is the slash and burn approach. It is quick but often you will find that over time many of the positions that were slashed and burned creep back into the organisation.

Your twin goals should be to maintain customer service levels and improve efficiency and productivity of support functions.

The first step is to look at your organisation chart in a new way. Typically your customer facing resources appear at the base of the org chart, with higher management levels above. By inverting this structure you place the most important customer facing employees at the top of the pyramid and all other support functions below. “Inverting the Pyramid”.

This allows you to examine the role and contribution of each support function in enabling your service delivery personnel to do their jobs. It helps executives determine which support functions are essential to the front line. It will also help decide where you can reduce some support functions and where to redesign other support processes while ensuring that you maintain the high levels of service excellence that your customers expect.

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20. April 2009 by Aidan.

When a new service is being developed a lot of effort is put into designing the ultimate customer experience. There is a lot of investigative work done on understanding the customer needs and also working through the customer journey and touchpoints.

These activities are essential. Unfortunately they are also a waste of time if the service you are providing is not profitable. Someone has to pay for the service or it will not be around for very long.

This is why it is critical at the design phase to consider the business side of the service in addition to the customer experience. You need to design profitability into the service.

There are a number of ways you can do this:

• The Service Offering

 When you are designing the service offering you need to consider what service levels you are going to provide, and crucially, what levels you will offer your customers to choose from. For example, you may decide to offer Bronze, Silver and Gold levels of service. Each with specific levels of service included and priced accordingly. This allows customer to see what they get and, more importantly don’t get, with the level of service that they choose to purchase and is an important mechanism in managing customer expectations. This is also very important in helping you to ensure that your costs and revenue are more closely aligned. That is, you are not incurring high costs on supporting low revenue generating customers.

• Revenue & Costs

It is obvious that you can improve service profitability by reducing costs and increasing revenue. But can you deliver the service at a cost that allows you to charge a fair and reasonable price?

At the design stage you need to ensure that you have fully considered the cost of providing service excellence (there is no point in designing any other type of service is there?).  If the cost of providing excellence is too high then no-one will pay the price you need to be profitable. The design phase is when you get the chance to really understand if you have a viable business. It also gives you an opportunity to identify key service attributes that will be cost sensitive if you ever find yourself in the position of having to reduce costs.

Why do you have to sell for a fair and reasonable price? Because if you don’t then your customers will stop buying from you as soon as they can because they won’t feel they are getting value for money.

• Alternative “funding” mechanisms

There are other mechanisms that can be used to fund the level of service that you want to provide and these should be considered at the service design stage. If your service offering is offered in conjunction with a product sale then there is an opportunity to cover part or all of the service costs in the product price. This is typically how new product warranty works. Alternatively, you can consider getting the customer to do the work for you by training them to be self-sufficient and taking care of certain steps of the service delivery themselves. We all do it now when purchasing goods on the Internet.  

Once your service is designed, from both the customer experience and business perspectives, you can continue to improve profitability in services by ensuring that you remain engaged with your customers. The closer you work with your customers the more feedback you will get on how to improve your service and this feeds into your service improvement activities.

So don’t forget, you may have the best customer experience in the business but if you don’t design profitability into your services you may not be able to afford to offer the service for very long.  

Posted in Servitize, Selling "Services", Customer Service, strategy, General | 4 Comments »

2. April 2009 by Aidan.

In order to design good services (or products) you need to ensure that the structure of your organisation does not get in the way. In most firms there are different departments with specific roles and responsibilities, e.g. Marketing, Design, Engineering, Sales, etc… 

This creates silos within the company and each department may have different objectives and success (& reward) criteria. All of this can get in the way of designing the best product or service.

Successful companies can break down these organisational barriers to really deliver high quality customer focussed offerings and the best way to achieve this is the use of cross-functional teams working together on a single project.

Peter Merholz talks about this in his recent Harvard Business Blog.   

Aidan

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31. March 2009 by Aidan.

There are many cases of customer service where the delivery of the service is blended with a product. For example, the bedroom you sleep in at a hotel is a product that is part of the overall service offering that the hotel provides. So, your experience and interaction with the hotel is a blend of the service and products that the hotel offers.

This product-service blend (PSB) needs to be strategically considered when you are reviewing your overall service offerings. You need to take time to review your strategy for both the product and service elements of the blend and the interaction of both of these. By taking this approach you will be able to accurately determine the correct actions to take to maximise your revenue and to deliver customer service excellence.

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26. March 2009 by Aidan.

Company Case Studies and Research Insights into World Class Service Business and Best Practices

The most recent views in service business will be presented by leading international companies and research scientists at the 6th Industrial Service Business Day by BestServ Forum. This year the presentations will emphasize in the following themes in particular:

• Service Design and Design for Services
• Service Organisation and Management
• Service Business during Recession

The event takes place on April 21st in Finland.

Here is the programme for the day.ISBD Programme

More information can be found here.

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