Innovating service

Remember benchmarking? It was the breakthrough management theory of the 80s – in which businesses strived to reach a desired level of best practice in comparison with similar organisations.

At the time a few dissenting commentators stated that it led to mediocrity and simply the “ticking of boxes”. It may well be that this view was correct with the digital revolution continuing to threaten the business models of established companies including services which currently represent 65 per cent of global GDP.

According to the McKinsey Quarterly, these service businesses need to innovate their offerings to survive and “smash” those benchmarks.

Large established firms are failing to innovate, with only a few fighting back. McKinsey claims there are three necessary elements to rebooting service offerings:

1. Focus on service innovation – akin to research and development on product development. Aim to spread the innovation throughout the business.

2. Personalise the customer experience as much as possible – perhaps even more (throw out the benchmark).

3. Simplify (and automate if possible) service delivery – complexity is expensive and large bureaucratic businesses are usually complex.

Similarly, companies need to focus on customers and look at the innovations in many industries (e.g. Amazon in retail, Uber in transportation and Airbnb in hospitality). It identified four evolving trends:

1. Higher customer expectations  – they want quicker and better service, and are happy to help themselves if it improves their experience.

2. Mobile internet – which means more apps and more services (including self-service) via smartphones so the customer is never out of touch.

3. Big data – which means more analytics which should equate to better service as businesses better understand their customers and provide true personalisation.

4. The “internet of things” – with ever more devices being interconnected the opportunities are enormous – as are the threats. 

McKinsey states companies that excel on the three necessary elements stated earlier, while maintaining the focus on customers will be ideally positioned.

The full article can be read here.