Striving for Service Excellence
Interview with Prof. Philip Moscoso
With companies confronting stronger competition and more demanding customers, delivering great service has become crucial to maintaining competitive advantage.
Philip Moscoso, former Bain consultant turned service management professor, helps managers understand how to develop models for service excellence and profitable growth.
Spanish-raised and Swiss-educated, Professor Moscoso was recently appointed Eurest Chair of Service Excellence. He discusses highlights of his research and upcoming service trends.
Most companies would agree that implementing excellent service is critical. However, in practice, the majority do not perform very well in the eyes of their customers. What are some of the major challenges for companies as they attempt to implement successful service models?
Most companies face challenges on the one hand on the conceptual front, and on the other, in implementation. Conceptually, too often companies aim to improve every aspect of their service just a bit and then charge a little more for it. But this is not the name of the game. Companies instead need to define and map-out how the service model will actually generate value for the company and its customers.
This approach has two main parts. First, organizations need to decide how money can be well spent so that the investment in service actually improves client satisfaction. In this case, a firm may decide to improve or add service aspects, but also to reduce or quit others that are less valued. Most importantly, the second part is to then convert that improved satisfaction into profitable growth, be it through cross-selling, recommendations, or other profit drivers.
The actual implementation of a service model is another huge challenge; i.e. to put it to work. Even if mastered, pay-off will be delayed, requiring management to apply long-term thinking. Furthermore, service excellence is a lot about managing people and therefore there are challenges involved in dealing with company culture.
Your research highlights the importance of taking a holistic approach to service model implementation. Can you briefly discuss what this means?
A holistic approach means understanding service as the entire experience through which a company's employees satisfy customers’ needs and creates value for them. That means more than just creating a great value proposition, but also a great delivery system. It’s important to think about service from strategy to execution and all the steps in between.
A successful service model has to therefore hit on all the dimensions that are part of that experience: defining the target market and designing a clear value proposition based on that definition; creating an operating strategy that allows you to profitably sell your value proposition to the target market; and finally, implementing a delivery system that fulfills the service proposal.
On this last point, it is important to be sure that delivery is not just in alignment with the client; employees and suppliers also need to be on board with the value proposition and fit into the service model.
Is there one perfect formula that yields service success?
There is definitely not a one-size-fits-all formula. Instead, a successful service model depends completely on each company’s strategy and value proposition. For example, Ritz Carlton and Accor's F1 Hotels both have successful service models, despite having very different value propositions and target markets.
The Ritz Carlton guest will partake in a very well executed, smooth service delivery system, from the doorman, to the reception desk, to the bell-hop and concierge. Here is an example where all procedures and processes are very well defined and the employee is given clear guidelines and training on how excellent service is delivered in the company. Even if there should be a glitch somewhere along the way, for example, a delay in room service, the employee is empowered to resolve the problem autonomously by perhaps offering the service for free. The guest doesn’t have to wait around for the receptionist to discuss the problem with the manager or negotiate a solution.
The guest at Accor's F1 Hotel won’t be offered free room service, as there is no such service. However, the guest is equally satisfied with his or her experience because of what he gets for a very low price, for example, good quality beds. The target market here has fundamentally different expectations: quality rooms (clean, silent and conveniently located) at the best price.
Ikea and Ebay successfully pioneered self-service models. How are these self-service models evolving?
More and more we are seeing self-service models moving towards the true co-creation of value. The idea of self-service therefore is evolving away from the gas stations and supermarket check-outs focused primarily on cost reduction, to a much closer company-client relationship and collaboration. Ultimately, good self-service models allow for increased profitability as well as increased customer satisfaction.
This type of collaboration is already very prevalent online. For example, companies like Amazon and Netflix are not only attractive for their huge product catalog, but add value beyond that through customer reviews and customized recommendations.
This type of advanced self-service model motivates customers to contribute quite a bit to the experience, for example, their computer, their time, information or expertise, etc. One important aspect that we are seeing in this model is that once a community and feeling of belonging is achieved, it is much harder for competitors to entice customers away.
Generally speaking, what novel approaches are companies exploring and what should we expect to see in the coming years?
We are already starting to see highly customized services to customers thanks to the growing sophistication of information systems, while at the same time leveraging economies of scale through globalization.
Technology will also have an impact on how interactions happen. Clearly, future approaches will evolve along the lines of the multi-channel contact and interaction that we are already seeing between companies and customers. More than ever, companies and customers interact with each other through various channels, both real and virtual, 24/7. Particularly, mobile devices will be key in the development of new approaches to service.
Finally, innovative service models will also evolve based on what the sources of profitability will be. Internet has witnessed the birth of many "free" services. But eventually, profits need to be generated somehow, an area that will be a great source of innovation in the years to come.