Every business, whether it’s a service or a product-based business, offers some form of an operations process. If your small business has a good operations process, it can be an advantage over your competitors.
Read on for more information:
Operations process for service vs product businesses
Last week we talked about an operations process – namely, what it was. As you may have guessed, the operations process of product and service businesses differ in a few important ways.
Operations process for service vs product businesses
In last week’s post, we looked at the operations process for a flower shop. The owner Lauren’s main “output” is flowers, a product. But what if your business is, for example, a consulting business – a service?
Inconsistency of output
The first major difference is that services have the possibility of inconsistency of output with a service. We’ve all had a bad haircut – perhaps the stylist didn’t have much experience, knowledge or skill, was just having a bad day, or truly wasn’t cut out (sorry) for this line of work. The result? A hood, scarf, paper bag until your hair grows back – a bad customer experience. It’s very challenging in a service business to make sure that each and every customer experience is the same. All the more reason to carefully and thoroughly train your staff and hold them accountable for producing the standard of excellence in service delivery that you’ve set for your business.
Service intangibility
Another difference between product and service operation processes is that customers can’t see, touch, feel, evaluate, or experience the service prior to it being produced. This is known as service intangibility. With a product, you can pick it up, roll it around, evaluate it, decide if you like it before you buy it. You can’t check out that new ‘do, however, until it’s too late. Thanks to website technology, new hairstyle websites allow you to upload a photo of yourself and drag and drop different hairstyles onto your head in the photograph – a “try before you buy” approach. This reduces the intangibility of services, and helps service businesses achieve the right customer experience.
The problem of inventory
Unlike product companies, service businesses don’t carry inventory. You can’t put a haircut on a shelf and hope it will finally sell tomorrow. Service businesses must learn to level out demand during off-peak hours to maximize the efficiency of their operations. For example, if a hair salon noticed that very few customers came in for a haircut between 9:00am and 11:00am, the shop could offer “early bird” discounts or senior’s discounts to encourage those who might be more available to travel to the salon at that time of day.
Inseparability of services
In a product business, the manufacture of the product was likely performed somewhere else, by someone else. With a service business, the service provider is the business. The hairstylist who performs haircuts really is the business. It won’t matter much to you, walking out with a paper bag over your head after a bad haircut, that the receptionist was friendly, that the coffee was good, or that there was lots of parking. The impact of incompetent or rude service providers is felt directly by the customer. You may not get a second chance with customer experience.
If you’re planning to run a service business, you’ll need to bear these differences in mind. As you review your customer experience and operations process models, think about how will you handle intangibility, inconsistency, lack of inventory, and inseparability of services. Think about how you will handle these differences, while ensuring that your customer experience is the best it can be.
Our word of advice – always put yourself in your customer’s shoes. Will it make sense to the customer? What would the customer think? WWTCT?
What is an operations process?
You may have heard the phrase “operations process” in relation to small business ownership before, but what is it exactly?
Basically, operations processes transform inputs to outputs. Inputs are things like raw materials, labour, equipment, information, and money. Outputs are products or services, as well as the level of customer satisfaction people have after they’ve purchased from you. Operations processes are different for retail, manufacturing, and service businesses – but the underlying idea is the same for all businesses, big and small.
Want to see it in action? Let’s use a flower shop as an example. Lauren, the shop’s owner, has to transform cut flowers, ribbons, wire vases, florist time, knowledge, and other resources into a deliverable flower arrangement. This arrangement must be packaged with a card delivered to the right person at the right time, and make the customer happy. All of this is Lauren’s operations process in action.
Here’s a closer look at the different components of Lauren’s operations process. She must:
- Purchase the right flowers from the right suppliers (purchasing);
- Have those flowers delivered at the right time in perfect condition to the shop (materials management);
- Make sure to have a trained florist on hand to assist customers (knowledge, labour and production);
- Create the floral arrangements in such a way that they are consistently high quality and works of art (quality control); and
- Ensure each and every customer is thrilled (customer satisfaction).
As you can see, an operations process is linear. The inputs go through a transformation stage and become outputs.
Every business undergoes some version of this process. Some companies are better at it than others, which becomes a competitive advantage for those small companies that learn to do this well. Each component of your operations process must be managed, measured for efficiency, and tested for effectiveness.
Next week we’ll talk about how the operations process differs between services businesses and product businesses. See you then!