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.