Moving from Products to Services – Why? So What? and How?

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Many organisations, across a variety of sectors, are undertaking the move towards a ‘services’ organisation. We analyse the reasons for and implications of the move and how a successful transition can be achieved.

The ‘why?’

Well, most see the attractions of higher margins and the ability to differentiate themselves from their competitors (even those who are also making the move!). Our experience of firms that have attempted the transition is that the first thing on the agenda is to understand the differences and a bit of early research will reveal the standard list, typically:

The four characteristics of service:

  1. Intangibility: services cannot be seen, tasted, felt, heard, or smelled before purchase
  2. Inseparability: services cannot be separated from their providers
  3. Variability: quality of services depends on who provides them, when, where and how
  4. Perishability: services cannot be stored for later sale or use (Philip Kotler, Marketing Professional Services, 2002)

The ‘so what?’

This is a little more difficult. Some decide ‘rebranding’ is needed, to ‘move up market’. Others decide to develop ‘solutions’ (as a different word for product!). However, with a little more thought it soon becomes clear that it is not just an understanding of the differences between ‘product’ and ‘service’ that is critical to the move.

All our clients were initially able to highlight things like ‘tangible versus intangible’ and ‘features and benefits versus value’ but this rather misses the point. Whilst these differences were perfectly valid for them, it is the implications for their clients that really matter and, therefore, the critical behaviours necessary for a successful services culture.

This is what it’s really about. A philosophy, a culture, a way of acting, a consistent and aligned set of behaviours that all evolve from an understanding of ‘the client’. If there’s one headline message, it is that ‘It’s about the client’. Once the whole firm understands that, then every behaviour, process, action and tool can be aligned to support that goal.

Once we’ve discussed with our clients the importance of ‘behavioural alignment’, it’s usually a pretty straightforward task to identify areas of ‘misalignment’.

Rather than provide yet another list, let’s work through a few examples.

Consider the business development process, for example. During initial discussions, using a services philosophy, the scoping conversation is critical, specifically considering context before content.

That means being able to take a broad strategic consideration (context) in order to propose focused tailored offerings (content), i.e. the solution is made to fit the client, the client is not fitted to what you have to offer. The onus therefore is on the provider to do (or assist with) the diagnosis, to help identify opportunities in their strategic context, not fit the clients’ problems to the ‘solutions’ we have previously devised.

The provider not only needs strategic understanding and diagnostic skills but also the confidence and self-assurance to be able to have the discussions to design the solution in collaboration with the client. Products sales tend to involve a monologue, services are much more of a dialogue.

We have also had initial discussions with clients on providing training in ‘Objection Handling, Negotiations and Deal Closing’ …all terms we would associate with a product based culture, since they are essentially ‘push’ type behaviours.

In a true services culture, we would expect to see:

  • Instead of objection handling (i.e. our solution is right): understanding reacting to and accommodating client reservations, both conscious and sub-conscious. In services, client reservations are part of the solution!
  • Instead of negotiation (i.e. bargaining): best value discussions for both parties, with long term taking precedence over short term. Product based negotiation tends to be coercive, services collaborative
  • Instead of deal closing (i.e. ‘push’ tactic): facilitating the buying process ‘pull’ tactic. In services, the more you try to ‘close’ the deal, the less likely the client is to buy. In services you need to give lots for ‘free’, in products you ‘pay for all’

We could go through all the other organisational systems and processes but I’m sure you get the picture. To make the move successfully, everything has to be aligned because areas of misalignment ultimately become visible to the clients and destroy confidence, trust and credibility.

Now to the most difficult bit, the ‘how?’

In our experience, the most common approach has been to ‘develop a training curriculum’. An analysis of the skills required (often termed ‘competencies’) is usually the starting point, followed by a Training Needs Analysis (TNA) to identify skills gaps, then a proposed curriculum. Nothing wrong in principle but it’s the competencies that are often the problem.

Most competency ‘banks’ are developed using a process called Repertory Grid Analysis, which involves broadly profiling high performers and, using factor analysis, identifying ‘competencies’ which the analyst then ‘names’. These are used to build a curriculum. The problem is of course that this is a typical product based approach, where the organisation is made to fit the competencies, irrespective of their current culture or possible future requirements.

As you may have guessed, The Openside approach is somewhat different. Once the organisation understands the critical behaviours required for success in services (which usually comes from understanding precisely what it’s like to be a client), then the training curriculum can be built incrementally and collaboratively, building on data gathered from each developmental event. (In a product based culture, intellectual capital is bought by the client. In a services environment intellectual capital is usually co-created… we practice what we preach).

Finally, once the behaviours have been defined, communicated and developed, quality control is then critical. Typically, this involves new rules, procedures and systems in a product based firm.

Here again, we would view this slightly differently. Successful service companies don’t try to enforce compliance, more actively they manage non-compliance.

Therefore, in managing the organisation, there need to be clear standards and very transparent and immediate processes for dealing with non-compliance. (In a product environment, quality control is about features and benefits, in services it’s about behaviours and absolute standards applied absolutely).

The management processes in a services environment are essentially culturally defined by values which are externally aligned on the clients. In a product culture they are mostly rule bound.

Product cultures demand rule based compliance. Services allow freedom to do what’s in the best interests of both firm and client, within the cultural boundaries. The only unacceptable behaviours are those which are incompatible with the cultural value system.

Services cultures might sound as if they are ‘loose’ but nothing could be further from the truth. They tend to be a culture of discipline, essentially self-discipline, by individuals working together on a basis of empowerment and mutual trust (see Good to Great – by Jim Collins).

They are underpinned by disciplined people, disciplined thought and disciplined action, driven by culture and values.

Key points in summary…

It’s about the client. In services:

  • The scoping conversation is critical, specifically considering context before content
  • Sales are much more of a dialogue
  • Client reservations are part of the solution
  • Negotiation tends to be collaborative
  • It’s about behaviours and absolute standards, applied absolutely
  • Culture tends to be self-discipline, by individuals working together on a basis of empowerment and mutual trust.

“London’s Financial District” by Flickr user Michael Duxbury used under Creative Commons License