You don’t understand your business and it’s a problem - Part 3
Building a great service business opens new doors for creativity - creating a better place to work and ultimately a better world for us all.
Part 1 is here and Part 2 is here.
The Path Forward
So if leaders are at risk of squandering their time, wasting their money, and building the wrong teams of their organizations by not appreciating the uniqueness of being in a service business, how do they move forward?
The answer is not to just do better or work harder.
Instead, the answer must be paired with an understanding of where these key resources (time, money, culture) should be applied. In a service business, there are three primary domains where these resources can be deployed: the employee search process, the customer search process, and into the organization itself.
Service excellence emerges by deploying resources in a balanced way to these domains.
The customer search process
The late Clayton Christensen described customers as “hiring” products and services for a ‘job to be done?’ A fast food burger’s job to be done? Filling an empty stomach. Same as hiring a lawn care service to cut an overgrown yard.
The first place a leader should deploy resources is to understand what ‘job’ your firm is being hired to do and why? This question is best answered by diving deeply into the customer’s journey from need to hiring your firm. With this information, you can craft a better experience for the customer - from start to finish. And in services, experience is everything.
Product businesses generally are better about understanding the customer journey. They’re developing the product’s features specifically to address customer needs. By contrast, services businesses often don’t fully understand why their clients hire them.
Consider how Proctor and Gamble will embed teams in the households of American families to understand how everyday tasks like loading the dishwasher and doing the laundry are done in the context of shuttling kids to/from sports, a barking dog, etc.
A service business can adapt this approach through a tool such as a customer journey map. This map analyzes each stage in a customer’s journey from:
Need identification - “I have a problem”
Requirement specification - “This is what it will take to solve my problem”
Solutions research - “Who can do what I need?”
Provider evaluation - “You say you can, but can you really?”
Decision - “ok, it’s you, let’s go”
Service delivery
Evaluation - “did that do what I thought it would?”
At each step along the way, you should understand how and why a customer is behaving and making the decisions they are. For most businesses, what emerges are several common patterns or archetypes. These are similar types of clients that engage your firm for similar reasons. Understanding these major customer groups can allow you to better tailor your offerings to better hit their potential needs.
The employee search process
Recall that employees are the lynchpin of a service business. The ones actually delivering the service to the customer are representing the entire organization. In that moment, they are the organization’s face. No one cares about the corporate parent of the restaurant if your server is a monster.
Attracting the right employees who are aligned with your culture and capable of delivering quality service is critical.
In the same way that customers have a ‘job to be done’ that drives their search for a firm, employees are searching for a ‘job to have’ that provides fulfillment, compensation, and opportunity.
The leader of a service organization can and should think about this career journey of an employee. Consider these stages:
Self-evaluation and career research - “Who am I and what do I enjoy doing?”
Opportunity research via networking or job postings - “Who is hiring”
Mutual evaluation in an interview process - “Is this the right place for me?”
Offer and acceptance - “Do they want me and is my pay fair?”
Employee on-boarding - “How do I get up to speed and contribute?”
On-going talent development and performance management - “How do I get better at my job?”
At each point along the way, resources can be utilized to help attract and retain the right sorts of employees. This can be a differentiated way to source unique talent.
For example, Alpine Investors, a private equity firm, has a CEO-in-training program designed to appeal to recent graduates of top-tier business schools. Upon completion of this program, these students are equipped and ready to be deployed in a C-suite role within Alpine’s portfolio companies. From the employee-side, the program dramatically accelerates how quickly they are able to move into a senior level role.
From Alpine’s perspective, there is tremendous value added as well. They are identifying talent before it has a permanent home. They are able to instill the core values, approach, and process that correlates with success in their system.
This is a great example of a creative way to change the traditional employee search process.
The firm itself
Deploying resources externally around customers and employees should also be paired with an internal focus to improve. Internally, a leader can focus on two primary things - the culture of the firm and the operational processes driving service delivery.
There is nothing more important than culture to the long-term success of the firm. Seriously, nothing. The great Peter Drucker framed it this way ‘culture eats strategy for breakfast.’ Culture is that important.
But far too often the culture conflicts with the value trying to be delivered. Consider the common ‘billable hour’ of an attorney. This method of compensation is in direct conflict with becoming the trusted advisor of the client. Trust takes time to develop, a mechanism that is now penalized.
Culture is what attracts employees to a firm and what keeps them there. Customers can sense whether the culture is promoting alignment between employee and firm. Culture has to be in sync with what drives success for your specific business and service.
Leaders must understand their culture and carefully craft it.
Leaders must also focus on the process of service delivery. Talking about “process” feels restrictive and constrained. But thoughtful processes can help ensure consistency of service delivery. Good process ensures that the customer gets similar value each time - paving the way for easy referrals of new customers.
As well, consistency lowers cost. It also allows a service to be replicable and scale with the firm as it grows. Good process also can address ‘service recovery,’ the manner by which the firm recovers from mistakes. Research has shown that a mistake well resolved can generate a more valuable long-term customer than even a customer who had no issues.
The thoughtful leader deploys resources to support enough processes to be useful, but not so much to create excessive bureaucracy.
Conclusion
Far too often the differences between product businesses and service businesses fly under the radar. We live in a world where product businesses implicitly dominate the narrative.
The onus then is on leaders to grow their thinking, if they want to break through to the next level. These leaders have three primary areas they can focus on: the customer search process, the employee search process, and the internal culture/processes of the firm. Deploying the resources of time, team, and treasure into a clearly articulated service model balances the interests of customer, firm and employee.
Done well, this creates a flywheel driving value for all parties involved. But that is just the beginning. Getting your service business to this place of balance may open up entirely new doors to explore.
Consider the story of the restaurant Alinea in Chicago. Alinea is a three-Michelin starred restaurant whose head chef, Grant Achatz, is known the world over for his paradigm breaking cuisine. The restaurant has surprised and delighted customers since its founding.
What is less well known is that Alinea was one of the earliest restaurants to begin pre-selling its prix fixe menu. Instead of waiting until after the meal to collect the bill, at the time of reservation, diners pre-pay for their dining experience. This sort of “ask” would be unthinkable in a setting that lacked the tremendous reputation of Alinea.
By implementing this change in the typical sequence of dining at a restaurant, it unlocked massive leverage within their business. Suddenly, the restaurant went from being relatively cash poor to cash rich. It was able to change its payment terms to suppliers and negotiate better pricing. Better pricing results in enhanced profits, driving new lines of business along with further enhancing the client experience.
Building a great service business opens new doors for creativity - creating a better place to work and ultimately a better world for us all.
Won’t you get started today?