Bringing Rigor to the Services Development Process

Many B2B companies do not take a thoughtful approach to innovation—especially when it comes to services.

There are well-defined processes for new product development. We need to apply the same rigor to new-service development. There is no reason the services of B2B companies, from computer maintenance companies to electric utilities, should not be as enticing, distinctive, and profitable as those offered by companies like Disney or Virgin Airways.

Innovation Needs a Process

A process for what we call new service design (NSD) is especially important for commoditized services to slow profit erosion. It allows marketers to create a new perception of value for the core service. They can create different versions of the core service for different segments of buyers and introduce innovations, both large and small, that enhance the existing service and improve its perceived value over time.

Many leading service organizations now use a formal stage-gate innovation process. But most of these organizations are B2C, whose high-volume business demands (and justifies) investments in careful process design and technology deployment. American Express, for instance, has a highly developed process with strict controls over eight development gates.

But not all of the NSD specialists work in huge, global corporations. The venerable British law firm Allen & Overy (which specializes in highly customised advice) has an innovation committee that reports to its leadership team on programmes to capture and exploit creativity. It has successfully sponsored the launch of a series of IT-based services that, at the most sophisticated level, automate a number of their clients’ processes.

As a general rule, high-volume, low-margin, easily reproducible services can be more easily developed using a rigorous design plan than highly customised services (like consultancy or other professional services). But as firms like Allen & Overy demonstrate, it is possible to apply the rigorous stage-gate innovation process to professional services through NSD. There are nine important steps to doing it well:

• Research customer needs. Companies often begin service design based on their existing offerings or in-house capabilities rather than on customer needs. Good service design begins with understanding customer needs.
• Generate ideas. It makes sense to stimulate ideas from staff and customers deliberately before putting effort into new service creation. Some technology firms, such as Orange and Fujitsu, now use the concept of an advisory board of customers to help at this stage.
• Prioritize development alternatives. Prioritization should be based on criteria related to the firm’s mission, strategy, and objectives, the need to generate more funds from customers, and the need to develop a new area of expertise. But alternatives should not be limited by current capabilities. Too many companies throw out ideas that they don’t have the skills to deliver. Instead, they should ask: Does this make sense for our strategy, and do our customers want or need it? If yes, do it. Then figure out how you can deliver. Do you need to acquire, hire, train, or partner?
• Design the service. It is important not only to design all the basic components of a service but also to ensure that they work together to create an integrated experience that meets all the buyer’s expectations without interruption or aberration. Integrated service is a like a ballet performance. In a ballet, the production’s components are prepared and rehearsed so exactly that, at a particular beat in the bar of a particular piece of music, the point of a ballerina’s toe will come down on a particular point on the stage that will be lit by a particular light. In the same way, a service’s components must be identified and integrated to make the service experience enjoyable and complete.
• Create the (simple) value proposition. The key elements of a good value proposition are:
  • A clear understanding of the buyers the value proposition is aimed at, including their rational and emotional needs
  • An integrated view of the offer’s tangible and intangible components and their value to the buyers
  • The proposition’s benefits
  • An understanding of the offer’s differentiation, or unique selling proposition
  • A short market-based description of the offer, sometimes called the elevator pitch
• Create the concept representation. Develop the marketing plan “ready for prime time” representation of the value prop that can be shown to potential customers during the concept testing.
• Test the concept with customers. Do some research with customers to determine whether the service really meets their needs. Revise as needed.
• Write the business plan. Each aspect of the service, including marketing materials, sales process, and service delivery, are summarized into a detailed business plan, which will test the viability of the service through financial rigour and research.
• Pilot the service. Select patient, happy, loyal customers—and give them incentives to remain that way should the pilots hit bumps.

NSD can teach firms valuable lessons about how to turn the acknowledged expertise of their service delivery managers and consultants into a much more lucrative competitive service offer, whether with the firm’s core service, added-value services, or brand-new offers. Getting to grips with this important part of the business should be high on the marketer’s agenda. It is not at all easy to create an offer that is distinct and different from others; but it has been done many times before—and can be done again.

Bev Burgess and Laurie Young are co-authors of the book Marketing Technology as a Service, which will be published by John Wiley and Sons on March 26, 2010.

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