Business services are the non-product elements of a company’s value chain. They include management consulting, software development and legal advice. Business services are a large sector, making up about 11% of EU GDP. They play a key role in the global economy, providing support to other sectors through new combinations of goods and services or by improving the quality of final products.
Unlike physical goods, which can be stockpiled for future use, services must be delivered on demand. Because of this, the customer must be involved in the process at every stage. This can make it difficult to measure performance and creates a different managerial challenge from the one faced by product businesses, which strive to improve productivity.
The success of service businesses depends on getting four things right. The first is designing the offering to be a good fit for customers. Often, this requires a shift in perspective from thinking about the qualities buyers will value to considering how the service will be delivered.
Other key issues in managing a service business include finding ways to reduce the costs of service delivery and developing the ability to adapt quickly to changing needs. This can be challenging, especially in an industry where the inflow of money must always be higher than the outflow to be profitable. It is also important to understand the difference between goods and services in order to price them correctly. For example, a hotel might sell rooms and food, but its real value is the experience it provides.