Business services are activities that support business but do not produce a tangible commodity. Whether it’s IT services that support other business functions or market research to support decision making, these activities are essential for companies of all sizes and types. Business services are a major industry, comprising a substantial portion of the commercial world.
Companies of all types and sizes rely on business services, both internal and external. For example, large firms often hire business services providers to help with specialized IT work or to provide expert advice and training for employees. Other companies may outsource their workspace needs to real estate services or landscaping agencies. This frees up space in their own facilities to conduct their core business.
The challenge of managing a successful service business begins with design. Unlike product companies, which can usually build a solid business model on the basis of product characteristics that buyers will value, a service company has to develop a service design that incorporates four critical elements:
These include customer understanding, employee competence, organizational capabilities and service system infrastructure. In this article, the authors present a framework for thinking about these critical areas and offer practical tips to help managers craft an effective service design. In addition, they argue that the current mental image of “how businesses work” is rooted in product-oriented ideas and that it constrains the development of innovative approaches to managing service businesses. The authors conclude that the future of business services lies in addressing these barriers to innovation.