Business services refer to activities that support a business but do not produce a tangible commodity. The term is a broad category that includes information technology, accounting, shipping and procurement services, among others. Companies often contract with outside business services providers to reduce costs and to gain access to new expertise and technologies.
In a service industry, the performance of employees can have as much or more impact on business outcomes as the products produced by the company. For example, if an architectural firm’s team of designers is poorly trained or fails to communicate well with clients, it can have an adverse effect on project quality and client satisfaction. Similarly, an employee who dithers while serving customers at a fast-food counter can make the service experience slow and frustrating for everyone in line.
Another difference between product businesses and service firms is that the business model of a service company depends on four critical elements that must work together in harmony. If any one of these elements is weak or out of alignment, the entire system will break down. In fact, when analyzing the successes and failures of business services firms, scholars have come to find that a high degree of success can be attributed to getting these four core aspects right.
Among the most important of these is the design of the service model itself, which includes how and where services are delivered to customers. For example, a service such as delivering goods to a customer may be delivered in many ways, such as from a truck or via a third-party logistics company that manages receiving and warehousing, picking and packing orders for eCommerce fulfillment, and shipping to customers. In each case, it is essential that the design of the service model be flexible and adaptable to changing conditions.
The next element to consider is the delivery infrastructure of a service business, which includes the systems and processes used to accept online bookings, quote work, schedule jobs, invoice clients and get paid. For example, an architecture firm may have standard operating procedures for accepting job bids, scheduling projects, creating work orders and communicating with clients, which need to be documented and updated regularly to keep them current. Similarly, a company that uses third-party logistics companies to ship goods for them may have a set of procedures for processing orders, invoicing clients and making payments.
Finally, a successful business service needs to have strong leadership and management to ensure that all the parts of the service model are aligned and performing well. This is particularly true when it comes to the interaction between revenue-generating lines of business and shared services groups. For example, it is essential that the leaders of revenue-generating business units not override shared services managers, especially in moments of strategic distress. Doing so can derail the success of the business, as it can create tension between a company’s profit-generating business models and its service-oriented operations. It is also essential for senior management to establish a culture of continuous improvement and innovation that permeates the entire organization.