CHAPTER 2 Shaping Service Strategies That Deliver Results

What great service leaders know: customers buy results and value, not services or products.

What great service leaders do: they focus on results and value for the right customers, as well as on the employee and customer value equations that produce them.

Some organizations clearly know to whom they will and, more importantly, will not sell their services. Private banking organizations impose minimum limits on the available wealth of the customers they will accept into their investment counseling and management programs. The advertising agency TBWA\Chiat\Day passes up prospective clients who are not interested in its philosophy of "disruption" that the organization applies in designing and implementing marketing programs. These organizations have a clear market focus, something that is worth a great deal on the bottom line.

A growing number of organizations understand that their customers do not primarily seek products or services. Rather, they're looking for results and value. This is particularly true for manufacturers that add services to their product line to deliver a package of offerings designed to provide solutions to problems. GE Aircraft sells engine uptime and productivity rather than just the engines themselves. As we mentioned earlier, IBM centered its renaissance several years ago on its Global Solutions business. In some cases this has led the company to operate entire turnkey data centers for its customers. In other cases, it has encouraged clients to replace their data centers with cloud-based services supplied by IBM.

Too often, management concentrates on managing for effort. It's a throwback to the days of time-and-motion studies that produced odd behaviors at companies compensating for piecework. At Lincoln Electric, for example, office staff would spend their lunch hours eating with one hand while hitting the same typewriter key over and over with the other in order to gain rewards for effort. By contrast steelmaker Nucor Corporation has a policy of rewarding steel mill personnel only for tons of steel that meet quality standards, in other words, results.

Breakthrough service organizations define their businesses in terms of results and value, not products or services. Once employees are selected carefully and rewarded properly, management places more emphasis on results than on how they are achieved. The organizations assume that the results will be achieved in a manner consistent with their strategies and values. This is breakthrough service leadership at work.

Still other organizations have based their success on their operating strategy and focus. For years, United Parcel Service (UPS) would not accept packages above certain size dimensions and a weight of 70 pounds because those were the maximums that one driver and a UPS "car" could handle comfortably. A two-driver operation would have broken the focus and forced an increase in the operating budget, higher rates, and a degradation of the value for which UPS is famous. Here the emphasis is on leveraging value over cost. In order to do this, organizations like UPS search for the operating edge, whether it is achieved through people, technology (the UPS "car" design with dimensionally correct shelves and transparent roofs for better light), or other means.

Excellent support systems help fuel the success of yet other service organizations. Often, these systems involve data analysis and communication in support of decision making. In the case of Target Corporation, big data enables the company to analyze purchase patterns that help predict customer behaviors. For example, it helps identify prospects, such as pregnant women, for certain kinds of merchandise even before the prospects are aware of their impending needs. It allows careful, detailed analysis of individual purchase patterns to fuel marketing efforts targeted to the individual consumer. It also helps Target select and stock merchandise in ways that anticipate demand, helping to ensure successful shopping visits for its customers.

Taken together, market focus, business definition, operating strategy, and support system excellence are all elements of what we call the strategic service vision. Service organizations that do all or even most of these things well—not only with regard to customers and investors but also employees—will continue to rewrite the rules by which competition takes place in their respective industries. TBWA\Chiat\Day, IBM, GE, Nucor Corporation, UPS, and Target are among the enterprises that are doing that. IKEA is, as well.