Service discriminators - the home broadband analogy

Copyright Virginmedia

Responding to a question of what discriminated one service over another, the best answer given recently was the home broadband analogy. Basically one reputable broadband service should be pretty much like the next. So what made me choose one provider over another?

Although day-to-day experience of broadband is the pretty homogenous whoever the provider, when we moved house there was a single major discriminating factor. My chosen provider (you can guess who) installed broadband the day after we moved in.  Not bad! Another, major household name, provider couldn't connect us until 2 weeks later.  Choice was a bit of a no-brainer!

Of course there are generally other elements in the decision making mix when you buy a service: what's the basic product like; how easy do they make it for me to deal with them (endless 'press 1 for ...' or straight through to a knowledgeable advisor); what's their image as a supplier; do I expect they will able offer future innovation and extra services; are they an innovation leader or a follower. Oh yes - there's also price! (Also, do I expect lower price/more for my money in future as technology develops or the market matures.)

For my broadband service there was some internal mental calculus around the above factors that led to my particular choice.  (A simple decision based on the wait for installation.)  In a business-to-business context, there's probably no single discriminator between providers. Likely it's the sum of performance in each of the important service elements put together coherently, and weighted in a formal assessment, that counts.

If you want to win, be world class/industry leading in all the elements.  Then you're in the game!

Maximising your Services Value

There are numerous ways Services can add value!

A previous post discussed how the value of a service is not just the 'technical solution'. So what's a checklist of other things that can add value to the customer?

The graphic shows 5 areas where value can be added (risk transfer, efficiency, etc). Value-adding features don't always sit just in one area. For instance a feature might be more efficient because it has superior 'output'. (One could also use the word 'performance' instead, remembering that sometimes performance just needs to be as good as asked for and not better.) So as the value-adding areas are sometimes over-lapping and re-inforcing - and in the spirit of London 2012 this year - the 5 areas are shown as interlocking Olympic rings.

The 'running track' shows a list of potential value-adding features. Some are common phrases, such as Sweat Assets. Others are less well known, such as 3PR (3rd Party Revenue, selling excess capacity) or Serial Sell (sell capacity/assets/service to someone else when 1st customer no longer needs it). It might be as simple as selling a service to a customer so that assets employed sit off their balance sheet and on yours or other parties!

There's probably no end of features and combinations that could be used, and they can be every bit as important as the prima-facie solution!

What to tell your service Customers!

Now you've got a 'rich picture' and a succinct value proposition.  Can you look the Customer in the eye and tell them the following things?

How you've added value in all the solution areas, to maximise your proposition?

What defined/known problems have you solved for the Customer?  (What's your evidence? Ideally shouldn't be more of the same.)

That you've quantified the improvement they see?

How are you tying in your reward to their service improvement?

How you are helping them transform and making the transition trouble-free? (There's an inevitable change of Customer internal processes and procedures - hopefully there'll be less of them.)  

Service? What Service?

"What was it you needed again?"

Full of beans, you and the organisation are ready to create a rich picture of the service you want to offer.

A trap companies can fall into is to immediately design the service you want to give the customer, based on what you're best at or known for.  So you're already delving in to the how, whether it's delivering technology, insurance or a retail experience.  It's a fairly natural move - it's comfortable, it's familiar.  But it might also stop you thinking what can be done better or differently for a customer or market segment.

An approach I recently used, that flowed very naturally, was using the step sequence below. (Admittedly some of us had dived down to some extent in familiar areas before seeing the holistic picture.  But a little of what you fancy does you good, in our case leading to a richer and better informed discussion.)

The sequence went:

• Create a high level vision for the service.
• E.g. what are you going to deliver, where, when, how quickly, with what level of confidence, and at what relative price?
• What are the high level requirements for the service?
• Examples might be rapid deployment, low management burden but high transparency and control, improved decision-making support, ...
• What are the top level capabilities and skills required?
• E.g. strong project planning & execution skills, excellent supply chain management, efficient global logistics, ...
• What are the required behaviours and culture?
• Are you going to be transactional or collaborative, how much transparency will you give, will you create embedded teams, are there shared outcomes/targets?
• What is the transition and phasing?
• How much due diligence is needed, are there pilot schemes, what are the interim capability levels, how will you phase the roll-out?
• What is the service 'architecture'?
• So finally (!), what activities will you do, what are the logical/physical/information flows, what innovation can you bring?
• What do you want to get paid for and how?
• Are your prices fixed, volume/activity-based, are you going to offer efficiency targets, what is your profit expectation?
• Can you do it?
• Do you have the core skills, how will you address gaps, are you going to team with other organisations? 
• On what grounds are you competing?
• On what grounds aren't you competing, what is your unique blend of skills and capabilities?

Once that all that is sorted, you can begin to use rich pictures, storyboards or executive summaries of the service you are going to offer.  

Service? That Service!

Wealthy Pictures

A painful experience earlier this year was around telling your story in pictures.  Yet, another such experience later in the year was very successful.

The difference?  In the first case our team tried to use a systems engineering diagram (MODAF view for those interested) to explain 'how it works' and 'what's in it for you' to our sponsors.  In the second case we used a 'rich picture' that showed benefits and the nature of transformations. (Nicely defined in Wikipedia, and a lovely health care example here.)

It shouldn't have been a surprise that the former approach was not a stellar success!  A typical Enterprise Architecture chart, for example, shows what happens beneath the bonnet.  Your stakeholders are more interested, however, in (stretching the motoring analogy, sorry Clarkson) why they should buy that car and those extras. (A.k.a. the benefits and the look and feel.)

Along with the rich picture approach, you also have to be able to express your value proposition equally powerfully and simply in words!  (That bit never changes.)

10 'Basics' for Service Design

A colleague pointed me to the resources of the Service Design Network on the internet. There's a fair amount to plough through, but also some refreshing takes. Below are 10 basics ideas for Service Design from Prof. Birgit Mager. The material is somewhat B2C focused, so for some points I've added comments for a B2B & B2I (Institution or Govt) environment.

Service Design. Basics.

1. Look at your service as a product. If Service Design is to be used in a substantial and not in a ‘decorative’ manner it has to be connected to the business strategies. Do B2B or B2I companies expend the same effort in Service Design as product Design?

2. Focus on Customer Benefit. We’re talking user benefits not technical product benefits.  These could be with uses for the product, not the product itself.  (iPads are good examples of this - my use of an online banking app to save time, for example, or to keep  kids quiet by play Angry Birds.)

3. Dive into the customers' world. Think of their world of emotions and experiences.  Help them envision and describe more of their own desires.

4. See the big picture. The service experience might start long before the customer gets in contact with the provider – and the experience does not end with the “Goodbye” at the shop or training centre door! Services are embedded in larger systems of relationships and interactions.

5. Design an experience. The choreography of experience – or at least of conditions that enable certain experiences - is a major challenge in the Service Design process. Can you learn from performing arts, or Customer Service courses?

6. Create perceivable evidence. Making the invisible visible and the not yet existing perceivable is a contribution of Service Design. The invisible service needs to be transformed into perceivable evidences along the touchpoints of the service experience.

7. Go for a standing ovation. In many service encounters the success depends on people – the service performance needs to be supported by a designed setting that serves the needs of the “actors”. As well as being about recruiting, development, empowerment and appraisal of people, are your infrastructure and IT part of the “choreographed” setting?

8. Define flexible standards. A 100% standardization as often found in production sites is not applicable for services – the right balance of standardization and flexibility needs to be defined when considering the type of service that is being designed.

9. A Living Product. Services need to be designed for learning and development, an open membrane towards customers, employees and environment needs to be part of the service system.

10. Be enthusiastic. The corporate culture has a major impact on the quality of the delivered service. So an attentive observation of existing culture and a support of cultural change is part of the design process.

West Coast Line - Winner's Curse?

Photo: Virgin Trains

Furore over First Group's award of West Coast Line franchise, though no media article has mentioned 'Winner's Curse' by name. It's been directly alluded to - did FirstGroup over pay? (Market thought so, FG's share price falling 6%. Proxy share price for Virgin Trains rose nearly 2%.) Put another way, the NPV of the FirstGroup bid is around 13% higher, with a 10.4% compound annual revenue growth versus Virgin's 8.5%.

Winner's Curse is the economic phenomenon that a winning auction bidder bids more than everyone else (obviously), so has likely over-estimated the value of the asset.  In theory common information and effective learning should reduce magnitude of the 'curse'. Empirically, it's still very hard to avoid. (Simple practical advice is the obvious 'bid less than you think it's worth'.)

Likely, information wasn't common - Virgin having greater data and experience on the line. Compounded, growth at 10.4% versus 8.5% is a pretty big one third higher. In Winner's Curse the winner often doesn't feel that good when they find out by how much they won! Wonder how FirstGroup will feel next morning?

As a taxpayer the question should be how backloaded FG's payments to Treasury are spread? If too much, then has FG won with perhaps less risk to them than it seems? And are performance bonds correctly sized through time to incentivise FG the way passengers would want?  

The answers to these questions should come out soon. The question of the size of the Winner's Curse will take longer to answer.

Update: 8 Factors for a Successful Service Proposition

Not forgetting #8: Network Effects of Customer Service!

1.  Good revenues: in many industries the underlying revenue driver is the number of people doing Service operations, as people costs dominate and specialist skills can be charged for.

2.  Creating value: you will be doing a high value-added activity, creating value by solving a Customer’s particular problem, and doing it better than they could themselves.

3.  Competitive advantage: using your technology or know-how, you will be doing  the activity better than your Customer/competitors.

4.  Key IPR: your IPR crown jewels is your ‘proven’ cost model – competitors can only speculate how much it costs if you have genuine competitive advantage/superior know-how.

5.  ‘Product/Technology’ performance: the asset/product/technology behind the Service only has to be just good enough!  (Inferior technology could very credibly win the overall service offer).

6.  Service design focus: for competitive pressure and service-focused outlook, should organisationally separate the service and embedded product bidding teams if considering using in-house technology.

7.  Create value through a ‘balanced’ service offer: a competitive Service needs to have a good balance of technical, usability, commercial and financial strength, creating value to the Customer in each of these areas.

8. Excel in Customer Service, Experience & Usability.  This binds the Customer emotionally and by their activities, making it harder to leave.

7 Tips for Successful Transformations

1. Plan comprehensively; have a robust Transition Plan. Choose quiet periods, offer dedicated support, have readiness planning & reviews.

2. Change Management is vital.  If nothing else have a strong comms programme.

3. Fit with new business processes.  Don't have old wine in new skins!

4. Training Analysis: who needs to be trained, what type/medium of training?

5. Then do the training, select & train Super Users to act as champions/mentors.

6. Have pilot schemes to test, debug, learn and build confidence.

7. Phased roll-outs, not big bang.  Big-bangs are difficult to plan and can rarely be pulled off. Getting really everyone and everything ready at the same time is a near impossible task.

7 Factors for a Successful Service Proposition

Gleaned from experience:




1.  Good revenues: in many industries the underlying revenue driver is the number of people doing Service operations, as people costs dominate and specialist skills can be charged for.
2.  Creating value: you will be doing a high value-added activity, creating value by solving a Customer’s particular problem, and doing it better than they could themselves.
3.  Competitive advantage: using your technology or know-how, you will be doing  the activity better than your Customer/competitors.
4.  Key IPR: your IPR crown jewels is your ‘proven’ cost model – competitors can only speculate how much it costs if you have genuine competitive advantage/superior know-how.
5.  ‘Product/Technology’ performance: the asset/product/technology behind the Service only has to be just good enough!  (Inferior technology could very credibly win the overall service offer).
6.  Service design focus: for competitive pressure and service-focused outlook, should organisationally separate the service and embedded product bidding teams if considering using in-house technology.
7.  Create value through a ‘balanced’ service offer: a competitive Service needs to have a good balance of technical, usability, commercial and financial strength, creating value to the Customer in each of these areas.