Business services are the activities that benefit businesses without supplying physical products. They support the marketing, production, safety, cost and convenience of a company’s work.
The distinction between a service and a product is a critical one to the successful management of any business. In the most basic sense, a product provides a tangible or concrete thing that can be sold and purchased at a predetermined price.
A product may be a pure commodity good or it may be a combination of both goods and services (a restaurant offering the food and providing other service elements, such as ambience). Many products fall between these extremes.
While products are primarily oriented toward meeting the needs of individual consumers, many services orient their marketing around serving either businesses or organizations. For instance, a pet grooming establishment will focus primarily on the needs of individual consumers, while a security service will target commercial establishments.
Service-oriented businesses have unique challenges when it comes to strategic management. A fundamental challenge is to make the service itself attractive enough for customers.
To succeed, managers must craft the services they offer to meet customer expectations. They must think about the characteristics that will appeal to a wide range of buyers, and they must develop an understanding of their own business’s unique position within the market.
In my teaching module at Harvard Business School, I outline an approach that focuses on these four key elements of service design. Those core concepts are based on what I call the “service model.” They help managers understand how to make their service offerings both sound and profitable. The approach is a powerful toolkit for building the successful service businesses of the future.