Service Economics – The ability to demonstrate the value of Service to the Boardroom in their own terms (Summary)

The service operation has to be heard and understood in the Boardroom, if it is to achieve its primary role of business development (revenue and profit growth) through feedback from the customer to the business. This close alliance with the customer is often referred to as customer intimacy and recognises the role of the customers in helping the supplier to continually improve product quality performance, and increase the relevance and usability of the products to themselves and the customers. The best way of achieving customer intimacy is to gain recognition from the Board that the service operation is not simply a provider of good service and satisfied customers but will generate and contribute to the profit of the business.

However, provoking interest in service from the Boardroom has demanded a mechanism that can demonstrate the value of service in financial terms. Service economics is an umbrella phrase, coined by Noventum, to convert the wide-ranging intangible aspects of service (including but not limited to processes, people, customers, strategy, brand values, competencies) into something tangible (financial information) that can be applied by the broader business community. Service economics provides a translation of intangible aspects into tangible information which will provide insight into the value of the service delivered, in an easy to demonstrate mechanism enabling the highly valuable impact of service to be understood by the whole business.

Businesses are realising that good service is not something that can be “bought” as an instant solution. Convincing customers they are getting good value for money is a hard act when customers demand more for less, and unless service is a long-term strategy, the results may be fragile. Successful service companies have usually been persevering for many years, focused around delivering value at the customer interface, and have found that service works best when the business is closely aligned to customer needs. This alignment is only achieved if the board fully supports the role of service and in return they expect significant results from integrating service into the business – a growing trend.

Strategies followed by successful service companies demonstrate that there may be a cyclical nature to business focus, emphasised during periods of growth and recession. Service is now firmly recognised as a mechanism that can and will deliver growth, and has proven to be a resilient revenue creator and margin builder. That does not mean product development or technological development will give way to service, quite the contrary; closer alignment means that they become integral. Cloud computing is an example – highly reliant on technology development, but fundamentally demonstrating value to the business through provision of a service offering.

Service usually represents a long-term sale with delivery and payment over a number of years – effectively annuity payments not one-off sales; appreciation of making the right decisions quickly for the longer term denies the manager the luxury of strategies worked out over months and lasting for years. Strategies need to be prepared in weeks to last for quarters and must accommodate continual refinement, and if strategies are fundamentally faulty, then no amount of tweaking or alteration is going to make them work. This underlines the need to have the building blocks in place of strong customer based strategies, such as those driven by brand and customer relationship, which can be personalised quickly by utilising acute customer awareness.

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