In this paper I write about the role Service Design has to play within the context of an increasingly service driven economy. Some elements of the paper have been removed to protect the identities of our live case studies.
In this paper I will detail the significant role that Service Design has to play in helping organisations to design new services, or reorient existing services around the changing needs of their customers, within the context of an increasingly service driven economy.
To do this, I will define what the service economy is and how it has evolved over time. Within this context, I will explain how service has become a point of differentiation for organisations, before using two live projects I, along with four colleagues, have undertaken as primary research for this paper, to illustrate how Service Design (SD) is being used by organisations to design new services that meet the changing needs of their customers. Finally, I will articulate what I can see as the key limitations of SD that are standing in the way of it taking on the significant role that it has the potential to play, as part of an increasingly service driven economy.
The evolution of the service economy
In 1948, the service sector’s share of the British economy was just 14%, fast forward to today and services account for more that 78% of Gross Domestic Product (Office for National Statistics, 2015). A trend that has been replicated in other high income countries across the globe (Sheram & Soubbotina, 2000). Within the UK, professional services, accounts for a significant percentage of GDP, with financial services, accounting for approximately 10% of British GDP, the highest percentage of any of the G7 countries (Office for National Statistics, 2015).
Despite the service economy gaining global economic significance as far back as the 1920s, it was not until the 1960s that authors seriously sought to understand the phenomenon that underpin its growth (Fuchs, 1968). This is in part due to an issue that plagued service industries in 1968 and continues to plague the sector today: the murky and changeable definitions and measures of service, services and the service industry.
As noted by various authors, unhelpfully, there seems to have been a preference within the sector to define a service or services by what they are not, or to define services as they relate to products, namely that the sector is responsible for the production of “intangible” goods, some well known—government, health, education—and some quite new—modern communications, information, and business services (Sheram & Soubbotina, 2000). For the purposes of this paper, services will be defined as an “economic activity that does not result in ownership of a tangible asset” (Oxford English Dictionary, 2015).
Today there are many theories that explain the increasing dominance of the service sector. Economic theory dictates that, as incomes rise, people’s needs become less ‘material’” and they begin to demand more services—in health, education, entertainment amongst others (Sheram & Soubbotina, 2000). Kurera & Kaboski (2009) have identified four key economic forces that they believe have led to the increased importance of services to the global economy which can be summarised as: the more individuals become highly skilled, the more they can get paid, the more products and services they demand and consume. Further, as the relative wage of these highly skilled individuals rises, so does the relative price of services. Put simply, services are not going away, as economically the sector can only grown in influence given the consumer composition of high income countries such as the United Kingdom.
Service as a point of differentiation for businesses
In what has emerged as a cross industry, consumer driven trend, organisations from all sectors are, increasingly, seeking to add value to their core offerings and create competitive advantage via services. Services are seen to add value to products by ‘delivering more value in use’ to the consumer by creating distinctive experiences that help to differentiate organisations over their competitors (Neely, 2012) (Baines and Lightfoot, 2013).
Servitization, the term coined by Vandermerewe & Rada (1988), is the process of ‘creating added value by adding services to products’. Servitization tends to happen in response to ‘financial challenges, strategic product differentiation challenges or in an attempt to meet (latent) customer demands’ (Baha,Groenewoud & van Mensvoort 2014). There are a number of different categories of servitization, ranging from ‘services with tangible products to products with services as “add-ons”’ (Baha,Groenewoud & van Mensvoort 2014).
When human centered approaches such as SD are applied as part of the servitization process, they help product driven businesses to uncover latent needs in their customers that when met, strengthen what may have previously been a product oriented, transactional relationship. An example from my own primary research that I will elaborate on later in the paper is Organisation 1, who are a primarily a product (training, membership packages) oriented organisation, but are using SD to understand and further develop their relationship with their customers and become a more service oriented organisation (Leitch, 2016). To that point, servitization has also been proven to add value to an organisation across the whole operating model, by re-orienting the supply chain and internal organisational systems and processes around the ‘design, build and delivery of an integrated product and service offering that delivers value in use’ (Neely, 2012). In this way servitization can improve the effectiveness and performance of a whole organisation.
Done properly, the benefits of servitization, or even just selling a service as opposed to a product from the start, can be huge. Unlike many products, the delivery of a great service is comparatively difficult for a competitor to imitate, allowing services to become a source of competitive advantage by ‘evolving the product identity to a point where the material content is inseparable from the service system’. (Morelli, 2003) (Vandermerewe & Rada, 1988). Adding services to products provides organisations with additional insight into their market and how their customers are interacting with the product and if they are adequately fulfilling their needs they can lock them into a much stronger, longer term relationship (Holmlid & Evenson, 2008). Finally, services can also offer additional revenue streams throughout the lifetime of the product (Vandermerewe & Rada, 1988).
Solving a problem, rather than selling a product
The success stories of the servitization space include Rolls-Royce Aerospace sales and service, IBM business services and Xerox document management (Holmlid & Evenson, 2008). All of which are iconic brands that have significantly increased the value and performance that their products deliver to consumers via the addition of advanced services such as maintenance, repair and replenishment. In doing this they have also significantly increased their revenues, and in some cases this has allowed them to reduce the price of their core products (Neely & Benedettini, 2012).
To be successful, servitization, or the design of any new service, must start with the correct ‘strategic intent’ (Neely & Benedettini, 2012). This means shifting from a product driven view of services focussed on improving ‘efficiency and service quality’, to creating an experience (Sangiorgi, Fogg, Johnson, Maguire, Caron & Vijayakumar, 2012). The strategy must also account for the entry into a crowded, competitive service-providing field where there is the threat of more experienced service providers and distributors who have already convinced customers of the value of their offerings. Entering a service field also requires significant changes in organisational structure to ensure that roles, policies and processes are all focussed on delivery of the service to the customer . Finally, organisationally, a service driven culture is significantly different from a product centred culture and this too requires time to shift and develop. (Sangiorgi, Fogg, Johnson, Maguire, Caron & Vijayakumar 2012)
However, servitisation is not an easy process and can take on many different forms dependent on the organisation (Cheng, Shui, Dawson, 2014). In fact many organisations misguidedly think they are selling products, but in fact they are selling services. To truly become a service oriented organisation will often require that an organisation thinks totally differently about the way they interact with their customers (Sangiorgi, Fogg, Johnson, Maguire, Caron & Vijayakumar, 2012). One industry that, in the face of total disruption, is slowly refining their services by rethinking their relationships with customers are the traditional banks and financial service providers.
There are a number of examples of how these traditional financial service organisations are changing, one such example comes from Finland where Nordkapp helped the Finnish Savings Bank, Säästöpankki create a new service experience “where customers and bank personnel could jointly map the financial status and promote optimal financial products for the customer” (Nordkapp, 2016). In that way, the same difficulties are being faced by those organisations that already offer services and are considering refining these services or building a new service offering – the design and delivery of a truly differentiated service in such a crowded marketplace presents a significant challenge.
Thus it follows that the demand for tools, techniques and methodologies for servitization has grown enormously. Most of the traditional servitization tools and methodologies have their roots in traditional target operating model design or process re-engineering, methodologies that are primarily focussed on creating the most profitable and efficient services to to support a product, rather than an entirely new service or experience that is supported by a product. As a human centered field of design, SD approaches the design of a new service differently, starting out with research focussed on customer insights, rather than best practice process maps and defining success as the delivery of services that meet and exceed customer needs and expectations.
SD has successfully been used to ‘servitize’ many a business from front to back, by designing new, or refining existing services around expressed and latent customer needs, orienting organisational cultures and systems around service delivery, and deepening the relationship customers have with the organisation as part of the process. This is one of the reasons why the role it has to play in the growing service economy is so significant. In the next section I will define what SD is, how it emerged as a field and further my argument about the significant role it has to play in what is an increasingly service driven economy.
The role of Service Design within this context
Despite Shostack and others documenting examples of poor service as being ‘widespread and frustrating’ suggesting that ‘rational management practices’ including ‘blueprints’ be applied as far back as 1983, SD is a relatively new field of design (Shostack, 1983). In part as a response from other designers to the rational practices and processes that resulted in the service delivery that so frustrated Shostack, the field of SD emerged in Europe in the late 20th century. By this time traditional design had become well established and had started to shift from turning ideas into products or artefacts, to allow for designers to apply their creative mindsets, methods and tools to areas beyond the traditional product design to a wider range of systems, services and organisational activities (Kimble, 2009). Further the advent of new services related to advances in the internet and technology made way for new fields of design, including interaction, experience and service design to emerge (Kimble, 2009).
Today SD is a human centered, interdisciplinary field of design that brings together a variety of different methods and tools from across the design field to ‘create or improve upon existing services making them more effective, useful or desirable for individuals or organisations’ (Kimble, 2008).
Although frequently paired together and sometimes mixed up, SD is not design thinking. Certainly, Service Designers make use of design thinking and other human centered design practices and the design thinking mindset is one that that all Service Designers should understand, but as a methodology, SD does not rely upon design thinking practices alone (Polaine, Lovelie & Reason 2013) (Kimble, 2009). In fact a typical SD project could bring together product, graphic, interaction, user experience or web design and be led by practitioners from any of the aforementioned fields of design (Leitch, 2015).
SD has the potential to play a significant role within the context of an increasingly service driven economy in supporting both servitization, as well as the refinement of existing services and the design and deployment of entirely new services. It’s combination of human centred design practices providing a way to ‘bridge the gaps across silos’ and develop truly customer oriented services, in addition to helping the organisations providing the services ‘create a complete and shared picture of what experiences provides value to the customer’ and the internal processes that are required to deliver upon these experiences (Polaine, Lovelie & Reason, 2013).
According to Polaine, Lovelie & Reason (2013) and other practitioners in the field, there are 8 key elements of a classic, design thinking influenced SD approach that could support: the servitization of an existing product or organisations; the redesign of an existing service; or the design of a new, free-standing service. These are: insight research; ideation and co-creation workshops; service/ experience/ ecosystem mapping; service blueprinting; service proposition development; concept sketches or validation; service/ experience prototyping: and user testing and delivery.
Many of these key elements were all applied as part of the two real life, case studies that were undertaken as part of the primary research for this paper, as explained below.
How SD was practically applied at two organisations
As part of the primary research for this paper, alongside a team of four other Service Designers, I undertook two projects with two organisations, one asked us to design a new set of services for them, while the other was seeking to improve an existing service.
Both cases served as examples of how SD tools and methodologies can make use of customer insights to add value to organisations that are already part of the service economy. Whether it be designing new services for org 1, or reorienting existing services to members on behalf of org 2. Ideally, these new services will help not only to improve the strength of the relationships both organisations have with their customers, but will also help them to meet their strategic objectives and start to differentiate themselves as high quality service providers in an increasingly cluttered marketplace.
The limitations of service design
As a field of design, SD relies upon experts from other fields of design to be successful, meaning that Service Designers are at their most powerful when they are working in collaboration with experts from other fields of design. This could be interpreted as both a strength and a weakness of SD, in the sense that to be successful the Service Designer needs to know the right time to bring experts in.
One of the great powers of service design as a practice is that when they are used properly, tools like service ecosystem mapping have the power to uncover new relationships and interactions that can transform communities or even societies. So it stands to reason that one of the key reasons why services fail are that the service provider, or the service designer designs the service in a silo. Siloed services feel disjointed for the end customer, who doesn’t care so much that each touchpoint is well designed, if the transitions between the touchpoints make the whole service feel disjointed.
There are several reasons why services are designed in silos. The first being when the designer fails to consider all of the key interaction points for the new service, or when each ‘bit’ of the new service is well designed, but no one has considered how all of the ‘bits’ fit together (Polaine, Lovelie & Reason 2013). Siloed services can result when the designer of the service is rushing to get the service designed without completing the necessary research and experience mapping, or, not taking enough time in the prototyping stage, to observe the success of the service across various touchpoints and tweaking the prototype appropriately. In the case of the FSA, our ecosystem mapping discovered a number of latent needs and potential services that their previous customer segmentation research had failed to uncover (Leitch, 2016 2).
Siloed services can also result when the designer of the service is focussed purely on the commerciality or the service offer, rather than the potential to deepen a customer relationship by designing a service that meets their latent and expressed needs. Finally, siloed services can also emerge when the organisation responsible for delivering the service is not included as part of the service design process.
In fact, ‘many organisations are structured in ways that actually prevent them from being able to deliver good services’ (Polaine, Lovelie & Reason 2013). This is certainly the case with the ODI, where our research uncovered a ‘disjointedness’ in the way that services were delivered to their members, that in part resulted from how their organisation is structured (Leitch, 2016). As a field, SD is not as well know for how it can be used to re-orient organisations around a new service, and SD practitioners don’t have as much experience in this space, so this crucial element can often be forgotten, de-scoped, or left to the organisation to solve (SD 1, SD 2, SD 3, SD 4, 2015). IDEO has resolved this problem by creating a team that is responsible for re-orienting organisational structures, systems and processes around whatever new product, service or space the IDEO design team has created. Service Designers need to get better at considering the whole ecosystem, including the back office of an organisation, if SD is going to successfully play the significant role it has the potential to play as part of an increasingly service driven economy.
A further limitation of the field, is that SD is still perceived to be ‘small and fragmented’ without ‘strong professional bodies or developed research literature’ (Kimble, 2011). This may in part be due to a lack of a commonly applied definition of SD or commonly applied, standards and practices. Recent publications such as This is Service Design and Service Design: From Insight to Implementation are helping by sharing what they believe to be best practice standards and practice. However, there are still many in the field who remain hesitant to do what needs to be done to professionalise the field, starting by agreeing on a commonly applied definition (Leitch, 2015). As I argued in my 2015 paper, this hesitance to professionalise SD as a field of design is, in my view, holding it back from being recognised as a respected and robust profession, by those inside and outside of the design profession. But, by the same token, many new and ultimately successful fields of professional practice have emerged from similar circumstances (Leitch, 2015).
Next steps for the field of service design
SDs ability to combine the right practices, methodologies and tools from different fields of design, technology and strategy, places it in a unique position to bridge gaps across silos, to create a complete and shared picture of what experiences really provide value to the customer, and to guide the development of truly customer oriented services. SD also has the potential to be used to reorient internal, structures, processes and systems to allow organisations to deliver truly customer oriented services. (Polaine, Lovelie & Reason, 2013). This is why SD has the potential to play such a significant role within the context of an increasingly service driven economy supporting both servitization, as well as the refinement of existing services and the design and deployment of entirely new services. However, the field will need to overcome the limitations outlined in the section above, if it is to make the most of this significant opportunity.
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