At the core of leading service business: What your customers feel they gain from you?
Service Business Designer Petri Aaltonen and Managing Director Peter Barkman explain why in-depth customer understanding is always crucial for selling and developing services.
It all boils down to a change of mindset – an organization beginning to work along with the customer instead of assuming what the customer needs.
That’s how service business designer Petri Aaltonen (in the first photo) and managing director Peter Barkman (in the 2. photo) from service design firm Palmu sum up their message. In their work, they also coach directors in customer-centered thinking.
Aaltonen rephrases the term mindset as follows:
“Instead of a preoccupation on what value the customer can bring, it’s about what the customer feels it gains.”
“The benefit or value experienced by the customer can be very emotional and hard to pinpoint, yet it matters the most, as emotions lead to decision-making.”
Peter Barkman describes what applying customer-centered thinking is not.
“It isn’t the traditional definition of customer value: discounted cash flow reaped from the customer.”
It aims for something different – value experience.
“Naturally, also money is linked to value experience, but other things are more important. And genuine decisions are based on these other things. An emotional level and level of meaning tie into this context.”
Businesses increasingly about service management
According to Peter Barkman, these days nearly everything involves service management. Many industrial companies that produce material products such as food, drinks, or cranes, for instance, develop services alongside their product offering.”
“The world is becoming increasingly servitized, everything including a service component. For instance, choosing a restaurant isn’t only based on the food on offer, but also on the ambience, reputation, and concept. The service concept and customer experience are even more important criteria than the food itself.”
This means that more and more directors are service leaders. And a service leader needs to be able to recognize and understand the customer and its needs.
Petri Aaltonen gives an example:
“Someone ordering an elevator from Kone involves a whole lot more than simply buying equipment. To understand purchase decisions of this type, you can’t simply ask from afar how the decision was reached. Instead, you apply ethnographic measures and aim to delve into the daily workings of the construction company and its partners and stakeholders. How they begin the decision process, compare elevators, the metaphors used – it’s like getting under the skin in decision-making and people’s needs.”
In service management and understanding customer needs, consumer information garnered from big data is combined with a qualitative approach, i.e. small but intensive studies that are close to people and rely on emotion.
“An organization often asks whether a small sample of say twenty is enough, as they are used to research data of 2,000 people…”
Peter Barkman explains that during his career, he has never come across a quantitative study reversing the findings of a qualitative study:
“You quickly see the importance of getting close to people when you integrate with the customer. Of course, the qualitative experience can be complemented with a qualitative study if necessary.”
A customer-centered approach affects leadership
Adopting a customer-centered approach has its effect on leadership. Leadership needs to change along with the process.
Aaltonen describes the situation:
“The question is how management can reach a coherent, new approach to leading the entire organization. In other words, customer-centered thinking is connected to the way modern people need to be managed. You quickly get caught out for using old methods and failing to share all your information in the organization. If you don’t take transparency and trusting people seriously, you run into problems.”
Peter Barkman’s aim is to make people see what service business leadership means in practice, and how it differs from other types of leadership.
“How to develop a new service with customers, and throw yourself into it full swing, quickly and boldly – with customers being the operative word.”
The new approach applies to the entire organization and its structure.
“Previously the research department first researched, then the product development developed, and so on. Now it’s different. The traditional model is a linear process that needs to be dismantled in many ways. You have to accept that changes can occur at any point, and those changes need to be immediately included in the end product.”
Aaltonen reminds that the underlying force of a customer-centered approach – understanding customer value – gets lost along the way in the traditional model.
“The organization no longer sees what customers gain from the service.”
For example, one customer values reliability, while others appreciate speed or cost-efficiency, i.e. price.
“What customers value and gain from the service differ, and an in-depth understanding of these is the value the company has.”
Testing leads to insight: change is worthwhile
An organization that puts service design methods to the test is often surprised by what customers value about the products and wish for in the end. Why is this the case?
Peter Barkman says that customers are often approached through wide-ranging online questionnaires, which, too, can sometimes lead to genuine, useful insight. But when this insight goes through the company’s linear, traditional process, it gets lost on the way.
A change of thinking is not enough: the leadership method and structure of the whole organization need to change, which is often wisest to test through prototyping.
“Testing can generate important insight for the organization. When an organization takes the plunge to pilot a clearly defined, large enough case – of a size that brings evidential value – it soon notices that now that we got rid of old structures, we are gaining incredible results!”
“A few experiences of this type soon result in a force that drives change, but before this realization, it’s extremely difficult to achieve new operating methods and results in the customer interface.”
According to Petri Aaltonen, from a leadership point of view, it’s about daring to change activities according to knowledge gained from a customer-centered method. It takes a plunge, experimentation, speed. A mental leap from old to new.
A change of mindset is a huge step towards the customer:
“In successful companies, management is involved in the customer interface, rather than stuck in their ivory towers. The attitude of a leader should be about being there to learn, not just to lead.”
Petri Aaltonen is one of the instructors at Aalto EE's Aalto Service Leader program. The program combines insights from technology, business and design, and provides tools to innovate and lead service business in a digitalized world of networks. Read more about the program »