In business, the term ‘Business services’ refers to a variety of tasks and activities that help keep a business running smoothly despite not delivering any tangible products. Some of the most commonly used business services include advertising, marketing, consultation, logistics (including travel and facilities management), waste handling, staffing, shipping, and administrative functions. Every business needs a certain level of these services to operate properly and efficiently.
One of the biggest differences between service businesses and product companies is that in a successful service business, employees aren’t the only ones who affect quality and cost. Customers themselves can be involved in operational processes to a significant degree and their input may be positive or negative. For example, an architectural client who explains the purpose of a new building well or poorly will have a direct impact on the design process and the final product. A customer who dithers at a fast-food counter will make the service slow for everyone behind him.
The service sector is a large and important part of many economies around the world. In Europe, it contributes around 11% of GDP and is a key driver for innovation and competitiveness. The European Commission has recently announced a new impetus for policy development in this area and set up a High Level Group on Business Services.
In modern economic theory, the three major pillars of the economy are considered to be primary, secondary, and service. The primary sector includes agriculture, mining, and farming, while the secondary sector encompasses manufacturing of tangible goods. The tertiary sector, which is comprised of the service industry, is considered to be the largest component of the economy. Services like retail, transportation, utilities, and cleaning are a vital part of this sector, making up more than half of the total value of the economy in some countries.
A service can be defined in a number of ways, but the most common definition is that it is an activity that helps people to do something. For example, a restaurant provides a service by providing a place for customers to eat, but the service also consists of setting and clearing the tables, serving food, and ensuring that all customers are served quickly and efficiently. The distinction between a service and a commodity good is that commodities can be stored in inventory or warehouses, while a service must be provided when it is demanded.
The success or failure of a service business often comes down to whether the company gets four critical elements of its service model right. These elements are: 1) the value proposition; 2) service design; 3) service implementation; and 4) service delivery. While some of these factors can be addressed using the same techniques that work for other product-based companies, some require new thinking and approaches that are specific to service businesses. By focusing on these four areas, it is possible to create a blueprint for crafting a profitable service business. To do so, however, managers need to understand that they must get all of these components pulling in the same direction.