Business services are activities that benefit companies without supplying them with physical products. They include marketing, consulting, logistics, waste handling and staffing services, among other areas. These activities can help companies improve their work environment and increase productivity. There are many different types of business services, but most fall into three categories.
In most modern economic theory, service businesses are considered to be a third tier of industry, behind the primary sector (minerals, agriculture and lumber) and the secondary sector (manufacture of tangible goods). A tertiary economy also includes the production and distribution of tangible goods as well as the tertiary services that accompany those goods.
When it comes to crafting a successful service business, managers face more complex challenges than those who run product-focused enterprises. For example, unlike a physical product that can be modified or redesigned, a service cannot be altered. Thus, service businesses must rely on more sophisticated techniques to build competitive advantages that can be sustained.
To that end, a service business’s success or failure ultimately comes down to whether it gets four things right. Based on my experience teaching business service management at Harvard, these elements are the core of what I call the “service model.”
In this article, I describe each element and how it contributes to a business’s ability to create value for its customers, differentiate its brand in the market and sustain competitive advantage. I also offer a tool kit for thinking about these critical aspects of service business design.
