8 challenges of service businesses

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Operations management in service businesses is primarily concerned with the “how” of the organisation – in other words how the service product can be produced and delivered to specification and in such a way as to achieve the organisation’s objectives.  It is also important to have a clear understanding of the “what”, i.e. the nature of the service product and how it meets the users’ requirements.  Clearly if the “how” is delivered with little reference to the “what” it would be surprising if this were particularly effective.  This leads therefore to a number of challenges faced by service operations:

  • Knowing who the customer is

This might sound obvious however it is not always the case.  In many service operations the same service will attract different customers who have different needs.  The “customer” could be defined in a number of ways – the user (the person that uses the service), the buyer (the person that purchases the service) and the funder (the person that funds the transaction).  This could be one person, this could be three different people all with different needs and benefits.  Understand who are the various customers, understanding their needs, developing relationships with them and managing the various customers are key challenges for services.

  • Knowing what the organisation is selling / providing

There may be differing views about what the organisation is selling.  One customer may have one benefit in mind and another has a completely different perspective.  This leads, in effect, to the perception that the organisation is selling different services.  Articulating and communicating the service concept to its different customers is critical for clarifying the organisation’s product to all of its customers and in ensuring it can be delivered to meet all of its customers’ expectations.

  • Managing the outcome and experience

One of the challenges of service businesses is that, for many, there is no clear distinction between the what and the how at the customer interface.  For example, a customer in a restaurant is buying both the meal and the way in which they are served.  This is completely different to manufacturing operations where the production and delivery to the customer are completely separate.  A critical challenge therefore for service businesses is managing outcomes and experiences simultaneously.

  • Managing the customer

Many service businesses face a challenge not shared by manufacturing, that of the presence of the customer, often as an essential part of the service production process.  The design of the service must manage the customer through the process with an awareness of moods and attitudes of individual customers.

The presence of the customer also renders the operation visible to the customer, so the servicescape needs to be designed to create the right atmosphere for the service.

  • Service is real-time

Many services happen in real-time, they cannot be delayed or put off.  A passenger wanting to purchase a ticket for immediate travel may not be willing to return tomorrow if the sales agent is busy.  Furthermore, during a service encounter it is not possible to undo what is done or said – things in the heat of the moment or promises that cannot be kept.  In service there is no rewind button.  Managing capacity and creating an appropriate culture are key challenges in managing real-time services.

  • Co-ordination

Service businesses are extremely demanding, requiring integration of marketing, resource management, people management and so on.  The small service business owner is responsible for co-ordinating these various parts of the organisation to deliver the service and understand and meet the needs of the customer.

  • Knowing the relationship between operations decisions and business success

It may sound obvious but making the right decisions that will lead to business success is a key challenge for all service business owners.  Business success may mean satisfying and retaining customers, attracting new customers, entering new markets, making profit, reducing costs.  The problem is in knowing how they all interrelate – and how changing one impacts on the others.

  • Improving the operation

A challenge faced by all small service business owners is how to continually improve and develop their processes and products, ensure that the outcomes are real improvements and that there is a culture that is supportive of service and change.  An important challenge in this area is managing the increased complexity resulting from change.

For more information on how Incrementa can support, improve and develop your business please click Service development

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