Introduction

Almost any business can be compared to a money printing machine that is controlled by “hundreds of levers”.  These levers represent external events that one cannot influence, such as market and economic conditions, politics, the competitive landscape, etc…, as well as aspects under the direct control of management, such as investments in Engineering, Production, Quality Assurance, Intellectual Property, time to market, adherence to standards, etc…

The ability of this machine to dispense profits is related to the optimal usage and settings of these levers.  Well guided, it will produce a steady stream of profits for everyone’s enjoyment.  Poorly manipulated, it will consume vast amounts of resources and produce nothing more than colorful sludge.

One thing is for certain, however.  There is no magic recipe that will ensure a permanent flow of money.  As much as business schools attempt to corral the world of business into a definable and controllable set of variables, it remains a domain ruled by instinct, insight, courage and experimentation as much as intelligence, analysis, planning and control.

It is an artist who is able to find the optimum settings for the various levers, and then usually only for a limited period of time.

One very important lever is Service, an aspect of business that is almost universally present and at the same time, most often poorly understood and poorly implemented. This White Paper talks about where Senior Management can look to improve the overall profit picture by examining Service investments.

Opportunity 1 – Profit, lots of it!

The purpose of almost all businesses is to generate a return on investment for the stakeholders.  As such, every element of the business should – in some way – be a positive contributor to the overall financial well being of the organization.  If it is not, then it is eventually removed.

Perhaps the greatest hurdle in Service Management is that Service is all too often seen as a sink hole for money rather than a revenue source.  In the majority of companies Service is considered overhead, something to be endured for the sake of running the business rather than a profit center to be invested in and supported so that it can generate highly profitable cash flows.

There are four basic categories of attitudes towards Service that can be observed in today’s market:

Necessary Evil - In spite of decades of experience that show this is not the place to be, this is where the majority of the business world lives.  The businesses in this space view Service as an obligation and nothing more than a means to compensate for product flaws and users who don’t care to read manuals.  Most would be quite happy to do without it, if they felt they could.  Because they feel that spending on Service is tantamount to throwing money out the window, organizations in this segment run their Service departments with an absolute minimum investment and grudgingly write it off as overhead.

Any and all categories of companies, large or small, high tech or low tech, consumer or B2B, find their home here.  Sometimes they have products that are so simple that the only Service deemed necessary is an on-line help screen.  Sometimes the products are in such high demand that spending money on Service wouldn’t really have much an impact on overall profitability, so it’s not worth the bother. Other times the organization is so small that of the 80-100 hours a week being put in, Service is simply the least important topic to address.  Often, however, a critical business mistake is being made and customers are running as fast as possible to the competition and blogging about their abysmal Service experiences.

Sales Enabler – Organizations in this category view Service as a means to help differentiate themselves in the market and bring in more product sales.  They often don’t consider the revenue opportunities presented by Reverse Logistics or Professional Services to be worth much attention. Their primary goal is to brand their organization as customer centric and give their products a higher intrinsic value. In this segment Service receives decent investments, but is never financially strategic.  Companies in this segment are often found in markets where overall market growth has slowed from an initial frantic pace and senior management is looking more seriously at market differentiation opportunities.  Service staff in this category will have a middle management role, but not a strategic one.

Complementary Product – Organizations in this category have grown to view Service as a separate and complementary product portfolio.  The Service organization is run professionally and as a profit center, receiving investments aligned with the market opportunity.  Companies in this segment are most often found in maturing industries where hardware and software margins are under increasing pressure and the much higher margins of Service Products become very attractive. These companies will have Service Management in the senior management team.

We Are Service – Organizations in this category embody Service as a primary driver of customer acquisition and retention.  They will typically be a high margin player and one could ask the question – “Are they a high margin player because of their Service focus, or do they afford a Service focus because they are a high margin player?”  As a Service professional, I will argue that the focus on a Best In Class and profitable Service offering is what makes them high margin.  However, a Best In Class attitude tends not to stop with Service and will have every department rightfully claiming credit for their role in the results.

In this category a Service mentality is all pervasive and receives significant investment. Service drives product strategy and is found at the highest level of management.  It is no surprise that companies in this category are often found in tourism and entertainment industries.  Oddly enough, this attitude is often lacking in companies active in the Professional Services and Service Management industry.

It is only in the Complementary Product and We Are Service mentality that Service is actually seen as a profitable opportunity.  However, many market statistics point to the most successful companies in the market and find that the overwhelming majority of them are in either one of these categories.  Could it be just coincidence?

Getting it Right – It would be naive to think that every company in existence should focus energy on making their Service Best In Class.  However, the Necessary Evil category can and should be done away with all together.  Every company should understand the profit impact of their Service and calculate that into their investment decisions.  If Service adds no viable profit, then get rid of it completely and see what happens to your customer satisfaction and loyalty.

Because completely getting rid of Service is not a viable option for any company, everyone should take the effort to understand what the financial value add for Service is and ask themselves the question – would more investment in Service bring a positive return?  It is a rare company that will find themselves already over investing.  The real question most will face is “Where to invest?”, as the opportunities are numerous and sometimes conflicting.

Low hanging fruit for investments are typically found in:

Product and Technology Skills Training – Obvious to most, skimped on by many.  It is unfortunately not a rarity that a new Service Technician or Help Desk employee will get a short introduction to the product and technology before they are put on the phones and set loose on the customers.  Even those who do take the time to provide an in-depth training seldom take the time to formally test new employees on their capture and retention of the new information.  And finally, because every product that is actively sold is also actively developed, update and “refresher” training round out the product and technology related training opportunities.

Interpersonal Skills Training – This is a need that is most specific to the technology field.  Many people who find themselves in Service in technology were selected for the role because of a technology related education and abilities, with little or no regard for their interpersonal skill sets.  Although unfair to many, the highly propagated “nerd” stereotype isn’t wholly without justification.  As such, anything that improves your front line staff’s ability to relate to and understand their customer has a positive downstream impact on your profits.  While this may not be terribly important for “nerd-to-nerd” communication environments, it becomes critical for “nerd-to-consumer” roles.

Professional Development - How many people in Service get a job because they have a “good customer facing personality”? They may be friendly, sincere and courteous, but also disorganized, incapable of managing their time or priorities and completely lacking of any strategic direction.  This all has its impact on productivity.  Investing in employee Professional Development not only makes for better skill sets in the office, but also for more satisfied and loyal employees, thus driving productivity and retention, all of which feeds into profits.

Sales Training – Is there anyone in Service who isn’t – implicitly – also in Sales?  Is there anyone in Sales who isn’t – implicitly – also in Service?  You cannot divorce the two, even though many organizations attempt to.  As such, every person in Service should understand the sales process, mentality,  priorities and goals.  They should know how to recognize and flag cross selling and up selling opportunities.  They should eventually become the fodder for future Sales staff.

Process, Documentation and Metrics – While less obvious tools for improving profit, processes, documentation and metrics are the basis of creating reliable, repeatable, measurable, accountable, and successful customer interactions.  Although the boss knows who on the team can do what, is this documented?  Anyone who has been around a while knows the escalation process, but what about the newbie?  Things change constantly, sometimes with breathtaking speed.  While we cannot be prepared for everything, documenting how things are supposed to run, clarifying who has ownership and measuring our successes are imperatives.

Equipment - Although I date myself with this example, I’ll never forget the experience of visiting a customer who was the proud owner of a very new and very expensive graphically oriented Unix workstation – this was in the days when DOS was King and windows were usually only found in the walls of a building.  Although the workstation had cost several thousand dollars, the company owner refused to invest the extra 300 dollars needed for a mouse.  Imagine if you would, how your productivity would be impacted if you had to direct your cursor with the arrow keys on your keyboard!  The programmers were almost in tears when they told me about how this had gone on for over a month and every single one of them was looking for a new job.  While the example is extreme, it exemplifies with horrifying clarity how those who use the equipment are best suited to determine what equipment is best.  You do have to trust your team and accept, just like with marketing, that not every dollar spent hits the intended target.

Better Compensation Packages – Because most employers see service as overhead, they tend to pay poorly and invest little.  Some go as far as to hire one or two highly talented individuals and then populate the rest of the team with low level and poorly skilled staff.  Improving the compensation package to attract more desirable team members doesn’t always mean offering more money.  Rather, there are several areas that can addressed, from subsidies for daycare and fitness to continuing education support, that will add value to the employee and differentiating you as an employer, without adding to paychecks.

The Working Environment – How many office environments could double as a modern dungeon?  How many employees are required to sit for eight to twelve hours a day on chairs that are cheap, uncomfortable or even partially broken and work behind desks that came from a second hand shop?  It is understandable that a startup needs to save cash and invest wisely, however Joel Spolsky makes an interesting point in his book “Smart & Gets Things Done” about investing in the workplace comfort and how a high end chair actually costs the equivalent of an extra roll of toilet paper per day.  Environment feeds emotions and emotions feed productivity.  I recall an interview that went on as a fresh university graduate.  The hiring company was a very highly respected name in aerospace engineering and one that anybody should be proud to have on their resume.  However, once they took me on a tour of my proposed working environment I decided that this would be one of the last places I would seriously consider.  The offices were dingy, the furniture looked like it was 20 year old army issue, cables hung from the ceiling into cluttered and badly lit work spaces.  Regardless of how exciting the work could have been, the place really looked like it came right out of a bad 1960s science fiction movie.  Make the office an enjoyable and welcoming environment and your people will show up a bit more happily.  You might even scare away fewer new hires!

How could your organization find more profits in Service?

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