Business services are a wide category of activities that provide companies with products or services without producing or selling them. These services benefit companies in several ways, such as marketing, production, safety, cost and convenience.
Service businesses have a unique set of strategic management requirements, which they must meet to be successful. In my core teaching module at Harvard Business School, I have developed a framework for craftily building profitable service businesses that incorporates four critical elements:
The Product-Oriented Image
The dominant mental image about “the way things work” in business is product-oriented. This is because physical products are easy to describe as a form of tangible assets that customers can touch and experience.
They have a relatively predictable demand and supply. In many cases, they also have a consistent quality, which makes them easy to build a brand name identification in the market place.
A major barrier to entry in a product-oriented business is the creation of a brand name, which distinguishes it from similar products produced by competitors. The same is true of a service-oriented business, but it is much more difficult to develop a reputation that will serve as a barrier to entry and protect it against the same type of competition that can destroy a product business.
A service-oriented business must develop a reputation for the quality of the services it produces and for the kind of people who deliver them. That requires new approaches to management that are different from those used in product businesses. These approaches involve the creation of systems that address the needs and expectations of both service providers and their customers in an integrated way.