— from UserExperienceWorks
Bschauer's the business case for or against service design sdnc11
Nov 01, 2014
Today at the Service Design Network Conference in San Francisco I presented the Business Case For (Or Against) Service Design.
I care about service design because I come at it as a leader of an organization that design services for our clients. Therefore, it’s in my best interest to know how and why it delivers real value. The more value it creates, the more organization will seek out, use, and pay for our work in service design.
Read all at http://brandonschauer.com/post/11710895190/sdnc11
I care about service design because I come at it as a leader of an organization that design services for our clients. Therefore, it’s in my best interest to know how and why it delivers real value. The more value it creates, the more organization will seek out, use, and pay for our work in service design.
Read all at http://brandonschauer.com/post/11710895190/sdnc11
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Transcript
— from UserExperienceWorks
At a train station in Seoul, South Korea
valueIt makes money
How might we increase our sales volume without adding more stores?”
“
valueIt makes money
systemsIntegrated and scalable
valueIt makes money
systemsIntegrated and scalable
peopleHumans in the right places
valueIt makes money
systemsIntegrated and scalable
peopleHumans in the right places
journeysA few sensible touchpoints
valueIt makes money
systemsIntegrated and scalable
peopleHumans in the right places
journeysA few sensible touchpointspropositionLow risk—it could fail
Service Design
valueIt makes money
systemsIntegrated and scalable
peopleHumans in the right places
journeysA few sensible touchpointspropositionLow risk—it could fail
Brandon Schauer@brandonschauer
The Business Case For (Or Against) Service Design
Brandon Schauer@brandonschauer
16
The Business Case For (Or Against) Service Design
SITUATION
Expenses
Markets
Business Models
Revenue
Return on Investment
Trends
*BS* my calculations based on other factual data
MARKET SIZING
Using a rough top-down estimate, the size of budget for service planning and design is BIG.
Annual economic output
Wholesale trade, retail trade, transportation, and public utilities
Finance, insurance, real estate
Total annual economic output
Portion of economic output from mid-and-large scale firms (50%)
Average margin on services
Cost of services sold
Annual investment in planning & design of services
Total annual investment in service design
$0.5 Trillion
$1.5 Trillion
$2.0 Trillion
$1.0 Trillion
10%
$100 Billion
2.0%
$2 Billion
1
2
3
4
1 ‘The Role of Services in the Modern U.S. Economy’, U.S. Department of Commerce2 The U.S. Small Business Administration estimates half U.S. GDP is from small business3 Conservative round guess4 The U.S. spend 2.6% of GDP on R&D according to the OECD *BS
MARKET SIZING
Using a rough bottom-up estimate, the size of spending on service design appears smaller.
Number of U.S. service design agencies
Annual agency book of business
Total agency revenue for service design
Number of in-house service design groups
Annual expenses/charge-backs
Total in-house expenditures on service design
Annual investment in service design
20
$1 Million
$20 Million
20
$2.5 Million
$50 Million
$70 Million
1
4
1 Estimate based on tally of listing on service-design-network.org and related sites2 Roughly ten $100K projects per year3 Gut estimate based on mirroring the agency estimate4 Gut estimate based on average staff size of 8
3
2
*BS
MARKET SIZING
$2 BillionEstimated size of total dollars spent in U.S. on the planning and design of services
*BS
MARKET SIZING
$70 MillionEstimated total portion of these dollars spent on service design
$2 BillionEstimated size of total dollars spent in U.S. on the planning and design of services
*BS
MARKET SIZING
$70 MillionEstimated total portion of these dollars spent on service design
$2 BillionEstimated size of total dollars spent in U.S. on the planning and design of services
*BS
COMPETITION
How’s the rest of this work getting done?
*BS
COMPETITION
How’s the rest of this work getting done?
System Engineers
— Complete unscientific guessing of who’s doing how much *BS
COMPETITION
How’s the rest of this work getting done?
System Engineers
Operations Management
— Complete unscientific guessing of who’s doing how much *BS
COMPETITION
How’s the rest of this work getting done?
System Engineers
Operations Management
Branding & Marketing
— Complete unscientific guessing of who’s doing how much *BS
COMPETITION
How’s the rest of this work getting done?
System Engineers
Operations Management
Branding & Marketing
Customer Service
— Complete unscientific guessing of who’s doing how much *BS
COMPETITION
How’s the rest of this work getting done?
System Engineers
Operations Management
Branding & Marketing
Customer Service
“The Organization”
— Complete unscientific guessing of who’s doing how much *BS
COMPETITION
— Complete unscientific guessing of who’s doing how much
How’s this workgetting done?
System Engineers
Operations Management
Branding & Marketing
Customer Service
“The Organization”
Straight-up Service Designers
*BS
THE BUSINESSCASESERVICE DESIGN
FOR
362 firms
95% say they are “customer focused”
from “Closing the Delivery Gap” by Bain & Company
How many of these firms’ customers agree that they deliver a superior experience?
8%
80% say they deliver a “superior experience”
REMEMBER THIS?
$2 BillionEstimated size of total dollars spent in U.S. on the planning and design of services
*BS
*BS
$2 BillionEstimated size of total dollars spent in U.S. on the planning and design of services
$40 BillionEstimated 2011 U.S. ad spends for top 5 service categories: Local, Financial, Telcom, Restaurants, and Travel & Tourism Services
OMG
For every $20 spent on ads for services in the U.S., only $1 is spent improving that service.
photo by Seal Beach AT&T
$2 BillionPlanning & Design of Services
$40 BillionAd Spend Service
Anticipation Gap
photo by Seal Beach AT&T
Service Anticipation Gap
The loss of future potential revenues and the wasted ad spend when a service doesn’t meet or exceed the expectations set with the customer.
Service Anticipation Gap
The loss of future potential revenues and the wasted ad spend when a service doesn’t meet or exceed the expectations set with the customer.
Ad spend that attracted
customers who didn’t engage
Potential future revenues lost
when customer didn’t engage
SAG = +
Increased customer acquisition and adoption rates by planning and designing for service propositions, sequencing, and flow
Overcoming SAG
Increased customer loyalty and advocacythrough user-centered planning of customer journeys across touchpoints and evidencing of customer value
THE BUSINESSCASESERVICE DESIGN
AGAINST
valueIt makes money
systemsIntegrated and scalable
peopleHumans in the right places
journeysA few sensible touchpointspropositionLow risk—it could fail
valueIt makes money
systemsIntegrated and scalable
peopleHumans in the right places
journeysA few sensible touchpointspropositionLow risk—it could fail
Five Fundamentals of Service Design
valueIt makes money
systemsIntegrated and scalable
peopleHumans in the right places
journeysA few sensible touchpointspropositionLow risk—it could fail
Current service design is under-powered at two of these
value
value — Where service design misses
NEW CUSTOMERS
EXISTING CUSTOMERS
EXISTING CAPABILITIES
NEW CAPABILITIES
— riff off of the Ansoff Matrix, circa 1957
Optimization Service Development
Market Development
Diversification
value — Why service design sucks at it
NEW CUSTOMERS
EXISTING CUSTOMERS
EXISTING CAPABILITIES
NEW CAPABILITIES
— riff off of the Ansoff Matrix, circa 1957
Optimization Service Development
Market Development
Diversification
Optimization Service Development
Market Development
DiversificationNEW CUSTOMERS
EXISTING CUSTOMERS
EXISTING CAPABILITIES
NEW CAPABILITIES
— riff off of the Ansoff Matrix, circa 1957
value — Why service design sucks at it
RETAIL STORE SALES
labor
marketing
overhead
location
profit
VIRTUAL STORE SALES
89¢for product
89¢for product
labor
marketing
overhead
location
profit
Where a dollar/won of sales goesvalue
*BS
RETAIL STORE SALES
89¢for product
labor
marketing
overhead
location
profit
VIRTUAL STORE SALES
89¢for product
labor
marketing
overhead
location
profit
3% PROFIT MARGIN 7% PROFIT MARGIN
Where a dollar/won of sales goesvalue
*BS
7% PROFIT MARGIN
RETAIL STORE SALES
89¢for product
labor
marketing
overhead
location
profit
VIRTUAL STORE SALES
89¢for product
labor
marketing
overhead
location
profit
3% PROFIT MARGIN
Where a dollar/won of sales goesvalue
*BS
Service design should be tapping new sources of revenue by changing the economics.
RETAIL STORE VIRTUAL STORE
The value virtual stores add
Stores
Customers/store
Average $/customer
100
500
$150
Stores
Customers/store
Average $/customer
25
200
$75
$225,000DAILY GROSS PROFIT
$26,250DAILY GROSS PROFIT
10%ADDITION
value
*BS
RETAIL STORE VIRTUAL STORE
The value virtual stores add
$225,000DAILY GROSS PROFIT
$26,250DAILY GROSS PROFIT
PER EACH ADDITIONAL STORE$2,250
PER EACH ADDITIONAL STORE$1,050
value
*BS
Market Optimization
Service Development
Market Development
Diversification
value — Where service design should be playing
NEW CUSTOMERS
EXISTING CUSTOMERS
EXISTING CAPABILITIES
NEW CAPABILITIES
Optimization Service Development
Market Development
valueIt makes money
systemsIntegrated and scalable
peopleHumans in the right places
journeysA few sensible touchpointspropositionLow risk—it could fail
Current service design is under-powered at two of these
valueIt makes money
systemsIntegrated and scalable
peopleHumans in the right places
journeysA few sensible touchpointspropositionLow risk—it could fail
Service design is extremely strong at some of these
SO WHAT?
THE TACTICS
THE TACTICS: FLOW-NOMICS
— from Daniel Kahneman
FLOW-NOMICS
The Peak-End Rule
FLOW-NOMICS
Conversion funnels
FLOW-NOMICS
Conversion funnels
FLOW-NOMICS
ROI ROB
FLOW-NOMICS
Return on Behavior
THE TACTICS: DIGITAL
THIS MUST BE STOCK PHOTOGRAPHY FROM 1996.
high-volume, low touch
low-volume, high touch
DIGITAL
DIGITAL
THE TACTICS: LEANSERVICEDESIGN
Measure
BuildLearn
Ideas
CodeData
LEAN
LEAN
Use of concept
LEAN
Use of concept
LEAN
Use of concept
LEAN
Use of concept
LEAN
Use of concept
LEAN
Use of concept
LEAN
Use of concept
LEAN
Mature businesses can do it too
The degree to which an innovation is perceived as better than the idea it supersedes
The degree to which an innovation is perceived as being consistent with existing values, experiences, and needs of users.
The degree to which an innovation is perceived as difficult to understand and use.
The degree to which an innovation may be experimented with on a limited basis.
The degree to which the results of an innovation are visible to others.
Relative advantage
Compatibility
Complexity
Trialability
Observability
LEAN
Increasing confidence of adoption
THE TACTICS: BLENDED TEAMS
The service designer isn’t the center of it all:(
COMPETITION
— Complete unscientific guessing of who’s doing how much
How’s this workgetting done?
System Engineers
Operations Management
Branding & Marketing
Customer Service
“The Organization”
Straight-up Service Designers
*BS
In fact, the service designer might not even be the center of a service design team
Industrial Designer
Mechanical Engineer
Electrical Engineer
product development
Interaction Designer
Front-End Developer
Front-End Developer
software development
ServiceDesigner
service development
BLENDED TEAMS
NEW CUSTOMERS
EXISTING CUSTOMERS
EXISTING CAPABILITIES
NEW CAPABILITIES
Optimization Service Development
Market Development
Diversification
BLENDED TEAMS
Staff teams based on the expected outcome.
More Marketing Savvy
More Operations Savvy
HERE’S THE PITCH
Awareness Entry Engagement Action
Fades quickly Long-lasting investment
Highly measurableInferences
Traditional Ad Spends Service Investments
THE PITCH
Capture lost revenues from the Service Anticipation Gap by applying just a portion of the overwhelming ad spends on the optimization and creation of services.
Awareness Entry Engagement Action
Traditional Ad Spends Service Investments
THE PITCH
Capture lost revenues from the Service Anticipation Gap by applying just a portion of the overwhelming ad spends on the optimization and creation of services.
Fades quickly Long-lasting investment
Highly measurableInferences
Brandon Schauer@brandonschauer
The Business Case For (Or Against) Service Design
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