Service business considerations

Service Business Considerations

A service business has special challenges compared to a product oriented business.  One of the primary considerations is scalability.  This article will cover service business considerations.

A product related, capital intensive business can scale production via investments in automation, employees, contract workers, outsourcing via multiple suppliers and so on.

A service business is more constrained in that generally the service requires specialized knowledge and skills that can’t be scaled quickly.  This means hiring employees is tricky since they have to be trained and then kept busy.  A downturn in business may result in layoffs.  An upturn in business may result in turning away jobs.

The more skill required to perform the service, the worse this problem becomes.  For a cleaning service, this may not be a big issue and employment can be scaled up or down as needed to match demand.

For highly skilled services, this can be a serious problem.  For example, oil service companies perform complex operations for their customers that require highly skilled engineers at the well site to run operations.  These companies invest a lot of money in recruiting, training, and salary for these employees.

Layoffs in a downturn result in lost talent and lost investment.  Lack of qualified employees during an upswing results in lost revenue and lost tie-in contracts for associated products.

One way to minimize scalability issues is to “systematize” the service.  This means developing repeatable processes that allows for efficiency and easier training of new employees.

Another method is to reduce the skill level required to perform the service.  Using knowledge management techniques to collect, organize and disseminate prior experience with the service can be used to improve operations.  This can be done by relying on previous job data to minimize the amount of experience required to perform the service.

When using specialized tools for the service, usability is a key consideration to ensure getting people up to speed as quickly as possible.  Making tools that are used to perform the service easier to use allows for lower skilled labor.

With service related business models the human element is extremely important.  Using techniques to help employees to perform the service as efficiently, with as little training as possible will pay dividends and are well worth the investment.