Anatomy of Service business

At least in Finland it is now a days fashionable to define yourself as service business professional - especially if you are in Tech/IT business. Managers who just yesterday preached importance of product based R&D, product based business models and product based sales competence... are now defining themselves as service business professionals - cloud application services professionals or software as a service professionals. Interesting enough these same people have no previous service business experience but magically they became professionals overnight. Wonderful!

One interesting business mindset is the arena of "after sales services" which are offered in so called after market. As the concept describes these "after services" are offered after actual sales - the big thing - large deal - has already happened and something is offered afterwards. Sounds like an after thought as well. Problem is that it is an after thought for the seller but not for the buyer. A customer who has just bought something is expecting usage & relationship value.  Long time ago Jack Welch told in his book that this mindset of after sales or after market puts services to the backseat of the car. Cannot agree more. It is like my Audi car - the big sell has already happened for Audi dealer and now I am just one of the owners who would like to experience Audi ownership and user value... but getting these so called after sales services and lousy website which promotes new models.

Another interesting mindset (hindering service business) very close to after sales services is the thought of value added services. Again as the concept states you add value to something ... to your products not primarily to your customers. Adding value = something else has the fundamental value and these services just add more flavor to it... that in the end you can sell more your products. Common stuff among box moving companies but oh man how hard it is to build real service led business models in these organizations (but interesting).

For many companies service is something what is given for free to customers (and to potential customers) to accelerate product sales. Services have in many cases actually more value to customers than products they buy but the seller has given these  value added services for free.Why this happens is because of good old manufacturing mindset - companies sell what they produce, not the value customers are actually buying from them. Eventually these same companies try to develop service business and are gray haired because of pricing - something what was given for free should now have a price. Hard to sell for customers but you call only blame yourself.

Characterizing service business from the seller's point of view - Actually value should be defined from buyer's point of view but 90 % of the businesses think sell side first so here are few ideas. Again not a comprehensive list, just a few learnings from the past.
- Price the received customer value (hard and soft benefits) not manufacturing outputs
- Identify and treat your services from the angle of "how to make my customer to be successful" not adding value to things you manufacture
- For you the moment of closing sales may be the most important. Customer receives the value in usage occasions which you can either consider and utilize with after thought services mindset or as moments when customer really benefits from the business relationship with you
- Don't sell a big deal but a long deal (which can be a big deal)
- Forget the ideas of "we are in the solutions business not in service business or vice versa". Solution and service are just words and concepts - solution need to have service components that it can be a real solution
- Owning something is less important than successfully using something
- Delivered value of service (service contract, service level agreement, service package, solution, etc.) is defined by the buyer but you manage and control the delivery
- Micro processes. Several companies define and implement different kind of process mgmt. frameworks but in many cases it is done in way too high level. Consider a five star hotel in Asia and compare it with regular hotel. Both sell the same thing, accommodation service, but it is the micro level experience processes which set them apart
- Experiencing service and service levels is universal and not tied to any industry. Lousy service experience from airliner can and will be compared to telecom operator or IT company
- CAPEX or OPEX (=leasing model) deals - don't jump from one side to another, some customers prefer mixed budgets and for some it is more beneficial to use CAPEX. You just need to decide whether those are still your cup of tea
- Internet. Internet is here to stay. It may change format or shape but basic ideas are here to stay. What ever you do in what ever business, please consider opportunities of Internet. Both outside-the-box and  inside-the-box - service business models will and have transformed because of Internet.

A few predictions where I hope to be wrong - 5 year horizon
- Majority of IT/Tech. companies will not understand aspects of service business and cannot deliver real service driven value (which could be benchmarked against non-IT businesses)
- Car industry will not offer ownership and usage value concepts (at least in Finland)
- Majority of online store owners will not utilize aspects and ideas of service business in their operating model
- Concepts of 1) value added services and 2) after sales services are alive and kicking without any indication of dying out