Businesses often live off or die from the quality of their workforce, but since service businesses are typically people intensive, a relative leadership advantage is all the more effective. Senior management should carefully consider the recruitment and selection processes, training, job design, performance management and other components that make up the employee management system. More than that, decisions made in these areas should reflect the service attributes for which the company wants to be known. They learned that goods are tangible products and services are intangible. However, this does not fully explain the differences. Finally, you can buy a digital product. In a sense, it`s just as intangible as a service, but it`s more like a good. Here are some ways to distinguish them: Each of these four elements – the offer or its funding mechanism, the employee management system or the customer management system – can be fatal to a service company. This is shown by my analysis of service companies that have struggled over the past decade. However, it is equally clear that there is no “right” way to combine the elements.

The proper design of one of them depends on the other three. When we look at service companies that have grown and thrived — companies like Wal-Mart in retail, Commerce Bank in banking, and the Cleveland Clinic in healthcare — it`s their effective integration of elements that stands out more than the intelligence of an isolated element. How can your management team come up with its own win-win solutions? When I ask managers this question, their impulse is to imagine what new value could be created for clients, and then think about how this could be funded through cost savings. Instead, I suggest starting with the question, “Where are our biggest buckets of costs?” With this in mind, managers can then simultaneously determine how they can reduce costs and create a value-added service. A good first place to look? Wherever time is a major cost element. The time saving is often fruitful, as it can directly improve the service while reducing costs. Large service companies are almost without exception very smart in selecting their customers. We saw this in Progressive`s very informed choice of who we want to do business with. Commerce Bank knew from its inception in 1973 that it had to set its own standards in the marketplace.

“The world,” said its founder, Vernon Hill, “didn`t need another bank `me too.` I had no capital, no brand name and I had to look for a way to differentiate myself from other players. The Shouldice Hospital, a Canadian specialist in hernia surgery, is very selective about its clientele. Not only does it serve patients suffering from a certain type of disease, but it also has the luxury of operating on otherwise healthy people. He flew over the crème de la crème of the market. Clients also have a lot of discretion in their operational activities, usually much more than employees. When a company introduces a new process that employees can use, it can simply issue a mandate. When customers are involved, such transitions can be much more complicated. Discover Zipcar, the popular car-sharing service. To reduce costs, the service model depends on cleaning, refueling, and returning cars by customers in time for the next user.

Motivating employees to accomplish these tasks would be routine; Motivating customer-operators required a complex and evolving mix of rewards and penalties. There is more variability in services versus goods. In many cases, with the exception of small businesses and small series, the goods produced by a company are identical. Imagine a company that produces notebooks. It is likely that this company has a specific operation, including quality control, to ensure that it produces the same range of notebooks each time to meet customer expectations and specifications for their products. This leads to the uniformity of a product. A visit to the salon and getting a haircut is a service, but buying shampoo in the salon is a form of merchandise. Does the service model create long-term value for customers, employees and shareholders? Can operational benefits be derived from service functions? On the other hand, services are more diversified.

For example, a restaurant that employs 10 employees as part of its servers may expect each person to be different from the other in the way they receive guests, take orders, deliver food, and answer menu questions. One employee may struggle one day while another has a great day to share with their guest. Each service provider may not only differ, but also the way the consumer perceives the quality of the service they receive. Services are intangible activities, facilities, benefits or assistance that a person or entity provides or provides to another person or entity. The recipient of the service usually pays for the service because the service provider has the skills or experience to meet a need based on the client`s request. Ensure that your workforce management activities (recruitment, selection, training, task design) enable employees to deliver the excellence embodied in your service offerings. Example: Many companies offer a combination of goods and services to offer more to the average consumer. Companies want to offer their customers an immersive experience so they can buy more from them. If detected in time, the threat of targeted competitors can be effectively countered. Is there a troubling area of competitive activity on your radar screen? If so, don`t be lulled by its small size and insulation.

Move quickly to understand what`s going on. In particular, focus on the participant`s improvement rate based on critical metrics such as market share, portfolio share, and quality of service. Absolute difference benchmarks can lead managers to believe that the threat is not imminent. But when a new competitor improves faster than you, the gap quickly narrows. As mentioned earlier, goods and services can sometimes be combined, which can make it difficult to determine exactly what is what. For example, if you buy a computer, it is a commodity. If you then take it to a repair shop to have it repaired, that`s a service. However, what happens if the workshop replaces the power supply as part of the repair process? As a general rule, the repair service and the power supply (a physical asset) are considered separately. However, this can make it more difficult to assess the difference between the two. The challenge of managing service businesses starts with design. As with product companies, a service company cannot last long if the offer itself is fatally defective. It must effectively meet the needs and wishes of an attractive customer group.

However, when considering designing a service, managers must go through a significant shift in perspective: while product designers focus on features that buyers will appreciate, service designers would be better off focusing on the experiences that customers want to have. For example, customers can attribute convenience or friendly interaction to your service brand. You can compare your offer at a lower cost with that of competitors due to longer opening hours, geographical proximity, a wider range or lower prices. Your management team needs to be absolutely clear about the service attributes the company will compete with. For example, if you buy a computer from Best Buy and you buy the extended warranty for technical support, you are buying goods and services. Other assets are long-term in nature and can last for many years or even decades. Furniture, crockery and houses are examples of durable goods intended to be used for long periods of time. Some products, such as automobiles, can last a very long time if properly maintained.

In a service environment, employees are not the only ones who influence the cost and quality of services provided. Customers themselves can sometimes be very involved in business processes, and their input influences their experience (and often that of other customers). For example, an architectural firm`s client may explain the purpose of a new facility well or poorly, affecting the efficiency of the design process and the quality of the final product. A customer who procrastinates at a fast food counter makes the service slower for everyone behind him. In business, products sold, traded, or otherwise made available to consumers or other businesses may be classified as tangible property or intangible services. Most countries measure their economies by the production and consumption of physical goods and intangible services. Some companies offer both goods and services, others offer only one or the other. These differences help assess whether something is a good or service, especially when the simple tangible/intangible separation is not so obvious.

Of course, even with these features, it`s not always easy to tell them apart.