Uncommon Service

1. Service excellence requires strategic trade-offs

You can't be good at everything. You must be bad in the service of good.

Strategic underperformance. To deliver exceptional service, companies must make deliberate choices about where to excel and where to underperform. This counterintuitive approach allows organizations to focus resources on the dimensions that matter most to their target customers. For example, Commerce Bank chose to offer the worst interest rates in the industry, allowing it to invest in extended hours and superior customer service. Similarly, Southwest Airlines sacrifices amenities like assigned seating and meals to maintain low prices and fast turnaround times.

Customer-driven priorities. Successful service organizations identify their customers' key priorities and align their offerings accordingly. This requires:

• Creating "attribute maps" to visualize customer preferences
• Identifying distinct operating segments with different needs
• Making tough choices to excel in critical areas while accepting mediocrity in others

By embracing strategic trade-offs, companies can create a sustainable competitive advantage that's difficult for competitors to replicate.

2. Funding exceptional service: Four key mechanisms

Someone has to pay for it. Service excellence must be funded in some way.

Four funding strategies. Companies can finance superior service through:

1. Charging customers more in palatable ways
2. Reducing costs while improving service
3. Improving service in ways that also cut costs
4. Getting customers to do some of the work

Creative approaches. Progressive Insurance demonstrates how to improve service while reducing costs. By deploying immediate-response vans to accident scenes, Progressive enhances customer experience while combating fraud and reducing legal claims. This approach simultaneously improves service quality and lowers operating expenses.

Self-service innovation. When designed thoughtfully, self-service options can both reduce costs and enhance customer satisfaction. Successful examples include:

• Airline check-in kiosks that give customers more control over seat selection
• Online banking platforms that provide 24/7 access to account information
  The key is to make self-service preferable to full-service alternatives, rather than simply offloading work onto customers.

3. Design your employee management system for average performers

The goal of an excellent service organization is to deliver outstanding results with average employees.

Realistic workforce planning. Many companies design service models assuming a workforce of superstars. Instead, organizations should create systems that enable average employees to deliver excellence consistently. This involves:

• Thoughtful selection processes to identify candidates with the right attributes
• Effective training programs that reinforce cultural values and operational skills
• Job designs that simplify complex tasks and leverage technology appropriately
• Performance management systems that align incentives with desired outcomes

LSQ Funding Group example. By developing intuitive IT systems, LSQ enables new hires to perform effectively on day one, reducing training needs and allowing the company to prioritize attitude in hiring decisions. This approach creates a more empowered and engaged workforce while maintaining high service standards.

4. Customers are vital co-producers of service experiences

Customers don't just consume service; they also participate in creating it.

Managing customer variability. Service organizations must recognize that customers play an active role in shaping service outcomes. This variability can manifest in terms of:

• Arrival times
• Service requests
• Customer capabilities
• Effort levels
• Individual preferences

Customer management strategies. To address this variability, companies can:

• Reduce complexity through menu options or reservations systems
• Accommodate diversity by building slack into the system
• Leverage self-service options to give customers more control
• Train customers in efficient service behaviors (e.g., Starbucks' ordering language)

Shouldice Hospital case study. This specialized hernia clinic demonstrates effective customer management by:

• Carefully selecting patients who fit their service model
• Providing clear pre-operative instructions and expectations
• Engaging patients in their own recovery through early ambulation
• Fostering a supportive community among patients

By treating customers as co-producers, organizations can improve service quality while potentially reducing costs.

5. Culture is the multiplier of service design

Service Excellence = Design × Culture

Culture's critical role. A strong service culture amplifies the effectiveness of well-designed systems and processes. Organizations that excel in service tend to demonstrate:

1. Clarity about the culture they need to succeed
2. Effective signaling of core values and expectations
3. Consistency in reinforcing cultural norms across the organization

Zappos example. The online retailer's success is driven by its relentless focus on culture:

• Clear articulation of ten core values that guide decision-making
• Intensive hiring process to ensure cultural fit
• Four-week training program for all new hires, regardless of position
• $2,000 offer to quit after training to ensure commitment
• Performance evaluations that heavily weight cultural contributions

By aligning culture with service design, companies can create a sustainable competitive advantage that's difficult for competitors to replicate.

6. Scaling service excellence: Standardization vs. customization

Defying this trade-off is possible. In fact, it's not only possible, but also likely to be the only choice you have if you want to deliver excellence and grow.

Balancing act. As service organizations grow, they often struggle to maintain quality while increasing scale. The key is finding the right balance between standardization (for efficiency) and customization (for customer satisfaction).

Strategies for scaling:

• Standardize back-end processes while allowing for customization at customer touch points
• Implement point-of-sale customization options within a standardized framework
• Continuously refine and simplify offerings to reduce operational complexity

Four Seasons example. The luxury hotel chain demonstrates how to deliver consistently excellent service across a global network by:

• Standardizing core processes and quality standards
• Allowing for local customization in areas that enhance the guest experience
• Maintaining a strong cultural emphasis on service excellence

By thoughtfully balancing standardization and customization, organizations can grow while maintaining their commitment to service quality.

7. Multifocused firms: Building multiple service models under one roof

Each service model in the company somehow makes the other service model better off.

Portfolio approach. Some companies successfully compete against focused entrants by developing multiple, distinct service models within a single organization. This strategy allows them to:

• Target different customer segments with tailored offerings
• Leverage shared resources and knowledge across business units
• Achieve economies of scale and experience

Shared services model. Organizations like CDM Group demonstrate how to create value through shared services:

• Centralizing back-office functions like HR, finance, and IT
• Maintaining distinct brand identities and client-facing operations
• Fostering collaboration and knowledge-sharing across units

Keys to success:

• Clearly defining boundaries between shared and unit-specific functions
• Ensuring high-quality shared services that add value to individual units
• Cultivating a culture of collaboration and continuous improvement

By building multiple, complementary service models, companies can achieve growth while maintaining the focus and agility needed to deliver exceptional service.

Last updated: October 3, 2024