Rewriting the Rules of Service Competition

What must leaders know and do to deliver breakthrough service? In an excerpt from the new book What Great Service Leaders Know and Do, James Heskett, W. Earl Sasser, and Leonard A. Schlesinger explore the dynamics of the "service trifecta."
by James Heskett, W. Earl Sasser & Leonard A. Schlesinger

Editor's Note: Harvard Business School professors James Heskett, W.  Earl Sasser, and Leonard A. Schlesinger literally wrote the book on service industry management with The Service Profit Chain. Now the trio is back with What Great Service Leaders Know & Do. This excerpt outlines the "strategic service vision" companies must adopt.

The Service Profit Chain

Leading a breakthrough service—one that alters the basis of competition in entire industries—is different. Those that have done it understand things that their competitors’ leaders either don’t understand or can’t emulate. They help achieve a “service trifecta” comprising: (1) extraordinary results and a high-quality experience for employees and customers alike, (2) high value (not necessarily low prices) to customers, and (3) relatively high returns (for the industry) to employees and investors. Chateauform’ in France, Apollo Hospitals in India, and Southwest Airlines in the U.S. have done it. Amazon, while achieving much of this, hasn’t yet realized it fully.

What must leaders know and do to deliver breakthrough service? Several things stand out. Among the things we’ve found that are common across such leaders, they know that customers buy results and experiences, not services or products. That’s why IKEA’s leaders focus on the few things that produce results and experiences for the right customers. This requires another important piece of knowledge: Service starts with the frontline employee and often involves the customer as well. As a result, these organizations staff very carefully, hiring for attitude and then training for skills, whether the business is fast food or cutting-edge medical organizations such as the Mayo Clinic. These are not good places to work for everyone, especially those who are uncomfortable coordinating with others, working in teams, or being denied “star” status.

These leaders know that the best uses of technology and other support systems create frontline service heroes and heroines. They use it to elevate important service jobs and eliminate the worst ones. Starbucks found this out the hard way when it introduced faster, larger expresso machines that ruined the service experience for baristas and customers alike by shortening the contact time and obstructing their view of each other.

Satisfying customers is not enough. Great service leaders take steps to develop a core of customers who are “owners” in the sense that they willingly suggest new ways of doing business while referring new customers to services they “own,” at least psychologically. That’s what organizations such as Intuit, USAA, and Rackspace do, essentially replacing an in-house sales staff with customer word-of-mouth.

Perhaps most important of all, great service leaders know that their current beliefs about the future of services are wrong. Today’s fast-moving competitive world is one in which services increasingly are shared, customer-produced, anticipatory in nature, and global. For these reasons, the primary task of these great service leaders is that of building organizations such as Omnicom and Progressive that are good at learning, innovating, and adapting.

Reprinted by permission of Berrett-Koehler Publishers. Excerpted from What Great Service Leaders Know & Do. Copyright 2015. Berrett-Koehler Publishers. All rights reserved.

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