Center for Services Leadership - How Can Goods-based Companies Enhance B2B Services Success?

How Can Goods-based Companies Enhance B2B Services Success?

IBM did it. GE did it. It seems like everyone is doing it, and some are doing it really well. The “it factor” is business-to-business services, whose success stories are filling business magazines and newspapers with tales of unbeatable profits and high-flying success. Peer pressure and potential glory pack a powerful punch, and if you're like most, your company is already headed down this road, or is about to start. But for companies with deep roots in producing tangible goods, making the transition to the Shangri-la of B2B services is not as easy as it looks. While Big Blue can make it look simple, adding core service offerings to your goods-dominant firm can be a complex challenge. And it's a challenge frequently overlooked both in the services literature and by practitioners alike. But recent research by Wayne Neu, from the Metropolitan State College of Denver, and Stephen Brown, from Arizona State University (“Forming Successful Business-to-Business Services in Goods-Dominant Firms” in theJournal of Service Research, published August 2005) tackles this topic by providing some actionable advice for managers. Neu and Brown's multi-firm case studies use the experience of four firms to explore what factors goods-dominant firms should consider when developing services, and how to enhance the success of their service offerings.

Based on the experience of employees at four Fortune 500 firms, the authors were able to distill which factors contribute to successful service development. Below we highlight those factors along with some key questions managers should ask themselves before embarking on this journey.

If the shoe fits: the importance of strategic alignment

Neu and Brown's research found that successful B2B service development in goods-dominant firms requires alignment across three sets of variables—market, strategy, and factors of organization. Successful managers formed their B2B services strategy to fit the demands of a highly complex market and molded organizational factors to support the newly formed strategy.

How complex is your market for B2B services? How easy will it be to form a strategy and adapt several factors of organization to meet the demands of a complex market?

Object of affection: a market and customer-centered focus

Successful companies adopted both market and customer-centered orientations as they developed their B2B services. Market orientation meant managers understood the complex needs of the market and directed their organization's activities toward satisfying those needs. Adopting a customer-centered orientation meant managers collaborated closely with individual customers to understand each one's needs and tailored a service program to satisfy those needs.

Does your company have what it takes to be both market and customer focused at the same time?

From black & white to color: defining the new value proposition

Shifting from a goods provider to a goods and services provider requires a new value proposition to customers. Managers in this study touted their firm's ability to create customer value by effectively 1) assuming responsibility for the whole challenging task of developing, supporting, or managing a complex business system, 2) tailoring the service offering to meet each customer's unique needs, and 3) enabling customers to concentrate on developing the competencies needed to successfully compete in their own line of business.

Can your company delivery on all three components of this value proposition?

Our people, our livelihood: the human resource advantage

Successful companies emphasized the criticality of their frontline workers in serving the needs of a highly complex market. As a result, they worked hard to ensure frontline roles were designed to respond to the challenge of the market in the following ways:

  • Serve as a trusted advisor:partner with the customer to formulate and implement unbiased recommendations.
  • Develop a learning relationship with individual customers:learn about customers' complex business needs and develop an intimate understanding of their business as they, in turn, get to know your business and capabilities.
  • Lead a collaborative support performance: with the service delivery often occurring in a team-based setting, the importance of working well together and networking with peers to resolve problems cannot be overlooked.
  • Deliver a complex service: frontline employees must be able to assume the responsibility of dealing with complex issues that arise during service delivery.
  • Hire for behaviors, expertise, and attitude: successful firms hired for behavioral competencies, technical expertise and customer-focused attitude. Some key things to look for when hiring include selecting for high collaboration, refined listening and communication skills, learning agility, and a strong base of technical expertise.
  • Pursuing services requires human resources to manage all of these issues—does your organization have what it takes to accumulate and retain employees who can carry out these roles?

Good bone structure: reorganizing to reflect strategy

During their study, Neu and Brown found that the successful firms integrated the responsibilities of multiple value chain activities across multiple business units. In that way, the complex service becomes a single market offer, although it requires integrated effort across the firm to deliver. That means working together laterally across the firm, but also outside the firm by linking with customers in collaboration to develop and implement new services. It also means decentralizing authority to be closer to the customer and retaining flexibility when it comes to frequently changing factors.

How well suited is your company's culture and structure for these kind of fundamental structural changes?

You get what you pay for: measurement and rewards

Because of the high degree of intra-firm collaboration required to pull-off successful B2B services, companies that did it well made sure their incentives encouraged this kind of working together. Those who didn't succeed were incented in ways which encouraged intra-firm competition, which is destructive to service creation.

Does your incentive system support the integration of responsibilities and intra-firm collaboration?

The sound of music: sweet improvisation

Much like improvisational jazz musicians, successful managers were able to adapt and change with respect to unanticipated events and conditions during the performance. While implementing strategies for B2B services, successful managers learned about customer needs and changed the service program in real time without skipping a beat.

Do you have the information-sharing capabilities and company culture that allow for real time reactions and adaptations?