Business Services Managers’ Challenges

Business services

The service industry encompasses a significant percentage of the commercial world. Many large firms rely on services such as accounting, human resources and logistics. Unlike products, business services cannot be physically seen or touched. Yet they are critical to the operation of a firm and can make or break its financial success. Business services also offer unique challenges to managers who must get the service model right.

A service business is one that does not create a tangible product but rather delivers value to businesses, governments or other organizations in the form of convenience, expertise and luxury. For example, a restaurant provides a physical good (the food), but it also delivers value in the form of ambience and the setting and clearing of tables.

In contrast, a manufacturing company produces and markets a tangible product. The success of the company depends on the ability to attract and retain attractive groups of customers who will purchase the product in large enough quantities to make the business profitable. Managers must learn to think about the characteristics of customers who will value a service and develop strategies to reach those groups.

Service businesses provide a wide variety of activities, from transportation to telecommunications and human resources management. Other common examples of business services include computer service bureaus, law firms, motion picture theaters and management consulting firms. Many of these services are delivered to other businesses, while others are offered directly to end consumers. Most business-to-business services are intangible, but some, such as utility services, deliver physical goods.

Like all businesses, a service-oriented business must be managed effectively to sustain growth. Managers must understand how to design a service and identify and recruit the right personnel for the job. They must also build systems for accepting online bookings, quoting work, scheduling jobs and invoicing clients.

A key challenge to service-business success is developing a clear and compelling brand image that will differentiate the business from competitors. The more abstract and complex the service, the harder it is to develop a distinctive image. Unlike product companies, which can build a strong brand through advertising and marketing, service companies must rely on the attributes of their employees and the experience of their customers to establish their brands.

Another key challenge to service-business success is managing the competing interests of revenue-generating line managers and shared service managers. Without strong centralized leadership, revenue-generating line managers tend to overrule shared services managers, undermining the performance of the business. Successful service-business managers must address these competing interests by establishing a system that balances the competitive autonomy of line managers with the collective success of the service business model. This approach to building a service-based organization offers valuable lessons for any firm seeking to succeed in today’s dynamic business environment. By learning the core principles of this approach, managers can avoid many of the common mistakes that lead to failure in service-oriented businesses.