Business services are activities that benefit companies without supplying physical products. These activities are essential to a company’s marketing, production, cost and convenience goals and can include everything from accounting and IT services to catering and shipping.
All companies require some sort of business services. Some of these are considered to be more important than others, but no matter what kind of company it is, they all need help from time to time to ensure that their operations run smoothly. These kinds of businesses are known as service businesses, and they can be categorized into four types.
The most critical business services are those that deal with customer-facing activities. These are the activities that the customers directly interact with, and they can affect a lot of things—from their satisfaction to the speed at which the work is completed. For example, if someone is rude to a waiter in a restaurant, that can have a direct impact on the experience that other patrons will have.
Other critical business services include the IT industry’s support of internal systems and processes, which helps ensure that employees have the tools they need to do their jobs well. This can be anything from software solutions to IT support and even hardware infrastructure. In addition, the finance industry helps to make sure that a company has the funding it needs by providing banking, investing and tax services. The procurement and shipping industries are also a critical component of this type of business.
A final category of business services includes the miscellaneous help that a company might need from time to time, such as legal services, insurance, cleaning and waste management. These kinds of business services are often outsourced to third-party providers, as they might not have the necessary expertise in-house. These activities are often classified as part of the “service economy,” which is a key driver of many economies and contributes over 50% of the global GDP.
As the world continues to shift to a more service-based economy, managers will have to learn how to craft effective strategies for running these kinds of organizations. In my course on business strategy at Harvard Business School, I teach students an approach to crafting a successful service business that’s built around these four critical elements. The success or failure of any service business, I explain, hinges on whether the firm gets these core elements right—and that they get them in concert rather than in isolation from each other. This framework has been a useful tool for thinking about the unique challenges that service businesses face and how to meet them. It is the same framework that I have used in my career as a management consultant and that many other consultants and practitioners have developed over the years. It’s a framework that, I believe, can help managers develop profitable service strategies for their own organizations.