The exploitation of the business opportunities of services varies
significantly depending of the company and it's business environment. Here are
a few short case descriptions to highlight some of the factors influencing the
success and implementation possibilities of service business.
Balancing cash flow
A manufacturing company operating mainly as a product provider in construction
business wanted to reduce the fluctuation in cash flow depending on the
invesment cycle of the business. Expanding to the maintenance business of
their products provided a good opportunity for this. There were two major
factors in the business environment to support that. The first was that the
use of their products was almost totally independent from investment and even
broader economic cycles. The second was that the maintenance of their products
was officially required and regulated, i.e., the customer’s had to take care
Stepping up in the value chain
An engineering company’s market situation in basic engineering services became
more competitive. Some of the previous value offerings became more labour
lease like. The company decided to expand to project management business. This
was suitable because the company’s one core business was to design and
engineer solutions to large infrastructure projects. By taking responsibility
of the project management the company aimed for more controlling position in
the project business. That meant also more lucrative position business wise.
Flexible relationship depending offering
Services may provide an opportunity to revenue growth for a product company.
However, the customer has to be willing to purchase the services, too. A
company which had its core competence and main offering in product systems
acknowledged that not all customers want to buy services. They created a
framework to analyse the customer’s service purchasing strategies, operations
and business environment to enable better matching of their offering and
customer’s requirements. The key insight was that developing new services is
not panacea for growth. Alongside developing services one has to take care of
the competitiveness of the basic product offerings, too.
Customer has responsibilities too
The nature of service business often requires deep collaboration between
service provider and customer organizations. This may set special
responsibilities for the customer and thus affect the successful cooperation.
A company operating in the construction business made a public private
partnership (PPP) offering to a city a turn key building with long term
maintenance contract. Some performance measures were defined for the
availability and usability of the building and related services. The contract
fee agreement included sanction reductions if these measures were not met. To
monitor the performance a help desk system was created. The workers in the
building reported the possible faults and deviations and the help desk
registered those. Based on these reports the monthly contract fee was reduced
if necessary. For the customer this required the training of the personnel
about the system and the performance measures.
Service process requires control
A customer company operating several plants with wide range of equipment
wanted to single source its maintenance operations. One of its equipment
providers decided to seize the opportunity and offered to take care of the
maintenance of the different equipment. A performance contract was also agreed
on. To be able to achieve the contract’s performance goals the provider
required to take on the whole maintenance organization of the customer.
The most advanced customers don’t require services
Service business is often seen as an opportunity to offer something new and
advanced to the customers. However, the customers’ may see it differently. A
company offering system solutions to telecommunications sector noticed that
the most advanced customers with high competences usually wanted to manage the
offered services themselves. They saw the service offering as their
competitive advantage area. Instead, it was the not so advanced customers that
requested services because of their lack of required competences.