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Three reasons why service businesses struggle and what to do about it

There is no shortage of ways that service business management can fall short. But there are proven ways to overcome obstacles to success.

Three reasons why service businesses struggle and what to do about it
[Adobe Stock / Roman]

I believe managing service businesses has always been challenging, largely because their success criteria differ so starkly from those of pure product or manufacturing businesses.

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Consider that modern services organizations—whether 100% service or as-a-service, or a managed services component within a larger firm—run sophisticated initiatives that typically include a unique combination of highly skilled professionals working across a spectrum of complex requirements, business models, and workplace modalities.

To that already knotty mix, add the degree and speed of change-management occurring today, and the fact is, service businesses have multiple ways to fall short of their goals. It’s a difficult needle to thread, and in my experience, many don’t do it well.

Are you one of them? Here are three key factors that indicate why a service business may be struggling.

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1. YOUR AUTOMATION IS INADEQUATE.

Historically, I’ve seen service businesses address their automation needs too narrowly—viewing those needs through a simplistic prism of just project management and timekeeping. As such, their automation tools tend to be inadequate for their business requirements.

Another challenge: Today’s automation software tends to target traditional product and manufacturing operations. I see few business applications that focus on a holistic approach to managing a service business; at best, they’re retrofitted with a few services-oriented features.

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As a result, many service business functions continue to be executed manually. Are you still using manual processes to integrate time/expense tracking with billing/accounting? To recognize revenue at each period close? To assess how a change in engagements translates into financial impact?

2. YOU HAVE DISPARATE, SILOED SOLUTIONS.

Granted, there are some service management-focused software applications out there. But I believe they share a common pitfall: They’re siloed and function-specific with limited or no out-of-the-box integration, which means they can’t span the full gamut of service-management activities.

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The resulting lack of systemic integration poses multiple management challenges. With no single source of truth to rely on, businesses may leak revenue and depress margins. They may increase billing disputes and days sales outstanding, potentially damaging customer satisfaction. They may restrict the ability to create a 360-degree view of resource allocation, tracking, and planning across a portfolio of projects. And they can make timely planning, reporting, forecasting, and sales quoting next to impossible. In my experience, the typical service business requires three or more disparate applications to tackle these tasks, leading to delays, errors, and customer dissatisfaction.

3. LEADERSHIP GIVES SERVICE MANAGEMENT LOW PRIORITY.

The management of sales, delivery, and accounting for a service business, whether standalone or in the context of a product offering, typically suffers from stepchild syndrome. This is especially the case for service organizations within product businesses, which may lack specialized tools, and thus, the ability to integrate easily into core business systems like financials, sales quoting, customer support, and the like.

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It should come as no surprise that with minimal-to-no tools or strict discipline, service organizations’ margins may be inferior to other lines of business within the enterprise. And, in an unfortunate instance of elliptical logic, those depressed profits may be cited to marginalize the services component of a company’s operations and revenue mix.

SERVICE-AS-A-BUSINESS

There is no shortage of ways that service business management can fall short. But there are proven ways to overcome obstacles to success. To manage services successfully, I believe most enterprises require a significant change in their mindset and a new approach to solving business problems.

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That can mean a redefinition of service delivery to businesses. In my experience, what’s needed is a seamless, customer-focused methodology—in both an organization’s culture and its technology strategy—to help create ongoing innovation that can produce outstanding experiences and business-building results.

In short, each step of the services cycle should integrate in a seamless fashion, and each enterprise function should be a part of a cohesive whole. There’s a term for this: “Service-as-a-Business.”

Service-as-a-Business, or S-a-a-B, is a reference model that brings together key capabilities for running a service business efficiently and effectively. Grounded in innovative customer experience, S-a-a-B requires a singular focus on the customer. It’s about delivering excellence to customers across the entire opportunity-to-renewal cycle, from estimating to invoicing, planning to procurement, and resources to revenue.

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HOW YOU CAN ESTABLISH A SUCCESSFUL S-A-A-B MODEL

So, how can your business establish a successful Service-as-a-Business model? Begin by establishing and cultivating an enterprise-wide culture that focuses squarely on your customers—acquiring them, serving them, satisfying them, and retaining them. Next, you’ll need an integrated technology platform—one that connects all the systems, processes, and people involved in delivering high-quality services, on time and on budget, while meeting or exceeding customer expectations.

By building (or buying) such a platform, you can eliminate the disjointed, modular components that power all aspects of service—the siloes in service delivery applications. Instead, you’ll have an integrated, single source of truth—a 360-degree view of your customer from marketing and sales to delivery, customer support, and ongoing project and service support.

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Today, each step of the customer journey should be part of a holistic approach. Whether your service team is a standalone organization or resides within a larger company, I believe the most effective way to respond to marketplace disruption with relentless innovation is with a cohesive S-a-a-B model and a total platform that enables you to continually deliver transformation.


Scott Brown is the President and CEO of FinancialForce.

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