Bschauer's the business case for or against service design sdnc11

— 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

peopleHumans in the right places

valueIt makes money

journeysA few sensible touchpoints

valueIt makes money

journeysA few sensible touchpointspropositionLow risk—it could fail

Service Design

valueIt makes money

Brandon Schauer@brandonschauer

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

$100 Billion

$2 Billion

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

$1 Million

$20 Million

$2.5 Million

$50 Million

$70 Million

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

MARKET SIZING

$2 BillionEstimated size of total dollars spent in U.S. on the planning and design of services

MARKET SIZING

$70 MillionEstimated total portion of these dollars spent on service design

MARKET SIZING

$70 MillionEstimated total portion of these dollars spent on service design

COMPETITION

How’s the rest of this work getting done?

COMPETITION

System Engineers

— Complete unscientific guessing of who’s doing how much *BS

COMPETITION

System Engineers

Operations Management

COMPETITION

System Engineers

Branding & Marketing

COMPETITION

System Engineers

Customer Service

COMPETITION

System Engineers

Customer Service

“The Organization”

COMPETITION

— Complete unscientific guessing of who’s doing how much

How’s this workgetting done?

System Engineers

Customer Service

Straight-up Service Designers

THE BUSINESSCASESERVICE DESIGN

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?

80% say they deliver a “superior experience”

REMEMBER THIS?

$40 BillionEstimated 2011 U.S. ad spends for top 5 service categories: Local, Financial, Telcom, Restaurants, and Travel & Tourism Services

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

Five Fundamentals of Service Design

valueIt makes money

Current service design is under-powered at two of these

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

NEW CAPABILITIES

Market Development

Diversification

Market Development

DiversificationNEW CUSTOMERS

EXISTING CUSTOMERS

NEW CAPABILITIES

value — Why service design sucks at it

RETAIL STORE SALES

marketing

overhead

location

profit

VIRTUAL STORE SALES

89¢for product

marketing

overhead

location

profit

Where a dollar/won of sales goesvalue

RETAIL STORE SALES

89¢for product

marketing

overhead

location

profit

VIRTUAL STORE SALES

89¢for product

marketing

overhead

location

profit

3% PROFIT MARGIN 7% PROFIT MARGIN

7% PROFIT MARGIN

RETAIL STORE SALES

89¢for product

marketing

overhead

location

profit

VIRTUAL STORE SALES

89¢for product

marketing

overhead

location

profit

3% PROFIT MARGIN

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

Stores

Customers/store

Average $/customer

$225,000DAILY GROSS PROFIT

10%ADDITION

RETAIL STORE VIRTUAL STORE

The value virtual stores add

PER EACH ADDITIONAL STORE$2,250

PER EACH ADDITIONAL STORE$1,050

Market Optimization

Service Development

Market Development

Diversification

value — Where service design should be playing

NEW CUSTOMERS

EXISTING CUSTOMERS

NEW CAPABILITIES

Market Development

valueIt makes money

Current service design is under-powered at two of these

valueIt makes money

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

THE TACTICS: LEANSERVICEDESIGN

Measure

BuildLearn

CodeData

Use of concept

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

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

Customer Service

Straight-up Service Designers

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

software development

ServiceDesigner

service development

BLENDED TEAMS

NEW CUSTOMERS

EXISTING CUSTOMERS

NEW CAPABILITIES

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

Bschauer's the business case for or against service design sdnc11

Business

Transcript of Bschauer's the business case for or against service design sdnc11

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