Designing Your Service Offerings
Does your list of service offerings look like a Cheesecake Factory menu? David identifies five hallmarks of poor service design along with five principles of effective service offering design.
Transcript
Blair Enns: David, I'm really looking forward to getting into this topic of yours, but I have to confess that when I first read it I thought, "Oh, that's not going to be very broadly relevant," and then I realized I had misread it. The topic is Designing Your Service Offerings.
David Baker: What do you think I said?
Blair: I read it quickly, and I got the words mixed up. I thought it was offering service design, why our listeners should all be in the service design business.
David: I should just assume you don't read much of what I write very carefully.
Blair: That would be a good assumption.
[laughter]
David: No, it's designing your service offerings. When you read it correctly, did you think it was an interesting topic honestly now?
Blair: Yes, honestly. In fact, I thought, "Wow, there is a lot of depth here." I'll confess, there's a bunch of stuff here that I had never thought of before.
David: Welcome to my world. I'm leading you down many new avenues of thought and exploration.
Blair: [chuckles] Welcome to the alternative reality in your mind. It just happens to line up with reality. Enough banter. Why are we talking about this?
David: Because it was my turn and our audience was--
Blair: Why am I letting you talk about this?
David: It is my turn and because our audience was ready for something really interesting.
Blair: Substantive.
David: Yes. The six things I cover in a total business reset, this is one of them, service offering design. I just find it so interesting. It's one of those areas where when we get deep into it, it seems to surface all kinds of things that people haven't thought of before, so there's that. It's also when you sit back and you realize this like, "Oh my God, how did our service offering mix end up right here?" It's like have you ever looked at all the laws that are still on the books in different communities?
Blair: It's like code in Microsoft Windows, they just keep adding it, and they never take any away.
David: [chuckles] Yes. They should not be allowed to pass a new law in any municipality unless they subtract three. It's like that's the only way we're going to clean all this stuff up. Service offering design is the same way. That's what got me thinking about this.
This stuff gets more complex over time just like your schedule gets more complex over time, and every once in a while, you've got to have a hanging in the public square of all your bad service offering ideas. When you were panicked at one point about not having enough work to do, and you decided to add seven things, hoping that somebody would read this list and hire you for something.
Then there's just all kinds of other areas too, but that's the big one. It just gets too complex over time. Sometimes it's because clients ask you to do things. That's a good way to grow when you are doing more things for the same clients. That's a really good way to grow, or you hire some overpaid person. Well, in your mind maybe overpaid, probably not overpaid, and you think, "Okay, one way to justify this hire is they're bringing this new expertise to the table, let's use them in a new way. Let's add to our service offering list and that'll justify hiring this more expensive person."
Then over time, your service offerings just get really, really complex, and it gets disastrous. I think every once in a while, you've got to step back and say, "Okay, folks, let's start over here. What do we really want to do for clients?"
Blair: Pruning. It's coincidental we're going through this right now. We're about to drop three of our training products and rebuild another one, so we'll get a whole lot simpler. I really identify with a few things you said. One is, "What can we do to drive revenue? Let's get into this area," or, "Let's deliver this in multiple ways," speaking of my own business now.
I see it in our clients' businesses, our listeners, when you take stock of your current service offerings, it's not really by design. It's the things that you said yes to over the years. To your point, I don't think you're making the case that quit saying yes to things.
David: No.
Blair: Just because you've built some capability for one client doesn't mean that you necessarily need to start advertising, putting that offering on your website, and starting to build a separate practice area around it. If we want to keep growing, we do have to prune from time to time. I think that's your key point here.
David: Yes, it is. I love speaking to the Society of Digital Group. I was at their conference earlier this year, and the topic was service offering design. I was real proud of myself because I thought, "Okay, I need to get a Cheesecake Factory menu," and I thought, "Well, I guess, I could steal one, but that seems awkward. Maybe I just by one on eBay." I found one on eBay, I bought it. I'm going to use this as a prop from the stage. Then, of course, I forgot it. Now I have this Cheesecake Factory menu, got nothing to do with it. Have you ever been to a Cheesecake Factory?
Blair: I'm sure I have.
David: Oh, man, it's not as bad as going to a Waffle House or something. You can admit it if you've been to one.
Blair: I've only ever been to a Waffle House with you.
David: An awful house as we call them. Back in 1978, The Cheesecake Factory had a one-page menu. Now it's legendary because there are 250 plus items on 21 pages. It's just overwhelming. It's overwhelming for anybody who eats there, but can you imagine how overwhelming it is for anybody working in the kitchen too? What we're saying is, we're actually not just saying let's slim this menu down, we're saying maybe we had to go to a-- how do you say that, fixed price menu? What's the French pronunciation of that?
Blair: We've done this before, you put me on the spot. It's prefix.
David: Prefix. No, that's P-R-E-F-I-X. Is that really how you pronounce prefix?
Blair: Yes.
David: Okay.
Blair: Prefix. That's a horrible French accent. Apologies to all my French friends.
David: If Marcus leaves this end here, we're screwed. Now, of course, that's a guarantee that he will.
Blair: I go into the restaurant, I know what you mean, and you get the menu with all of these different options. I just hand the menu back to the server and say, "I'll have this special." I'll just take my chances because I am not willing to make the cognitive investment required to sort through all those items. I just want to eat. If you're in a restaurant that has that many items, the food isn't any good anyway. We all understand that.
David: Right. Why doesn't that translate into how we design our service offerings at firms like ours? It's so weird to me.
Blair: Yes. I hear you. You've identified five hallmarks of poor service offering design. What are they?
David: What happens when you haven't thought through this and you have too many service offerings, and after going through these five, I'm going to suggest a particular mantra that I think will be really useful as you think through this, but the five are these.
One is that you end up with people who have to wear multiple hats. There's always going to be a little bit of that, particularly if you're a firm of a smaller number of people. The idea of getting to be a bigger firm is, in part, the idea that the individuals on the team need to wear fewer hats. That's an advantage. Now, everybody doesn't feel that that's an advantage, but that really is an advantage because then they can get deeper, they can know more what they're talking about.
If you've got lots of service offerings, then you have people who have to wear many hats and they have to fill in for each other. They have to be back up for somebody else. They have to have-- or just goes on and on, and you end up having people on your team, the ones who excel are the ones who are super smart, who can think on their feet, and it's really hard to find replacements for them because they have to be proficient in all of these areas. That's the first, wearing multiple hats.
The second, this is maybe the biggest one. This is the one that causes people to think about their service offering design more than anything else. Let's say they have a large branding practice. They do new identities for clients and so on, and then they have, because somebody has asked them to do it, they build website properties for those same clients, but they keep finding clients who want just the branding or they want just the website and not necessarily both. What ends up happening is you have an underutilized department because you don't have a defined or a prescribed path.
You have clients who are choosing what they want to do for you, and you can't always predict that, that's not a part of your screening process. You end up with certain departments that are not busy as much as they should, and then you sit back and say, "Wow, we can't just lay these people off and rehire them three weeks from now, what do we do?" It shows up in the profit of the firm. I'm going to try to solve this with a mantra later, but that's the second one. You've got entire departments that are underutilized, you also end up-- this one is subtle and not a lot of people have seen it until I pointed out, but you end up with multiple small companies under one roof.
If you have different service offerings, and you allow clients to pick and choose which ones, then in effect, you're working as a smaller entity for them and you wake up one day and you realize, "Oh, our competition is smaller firms." We're, say a 30-person firm, that's a deep bench, we could do lot, we can almost be full service for our clients, but this client here is only using five of our people. They compare that.
Blair: You're a collection of five or six five-person firms.
David: Yes, and it shows up from a positioning standpoint. I've pointed that out in many cases, and I don't think anybody's ever quite realized, "Oh, that's why we're competing with smaller firms." It's because of that.
Fourth is you really overcomplicate the whole AM and the PM component. If you have AMs that have to understand, they have to speak intelligently to all of these different service offerings, or even PMs, then their job gets very, very complicated instead of slimming it down. Then, finally, you end up being an order taker, back to this menu thing, instead of saying, "No, listen." You and I have been to The Catbird Seat Restaurant here in Nashville. It's a fixed-price menu. It's the same courses for everybody. It's 8, 9, 10, 11 courses, and there isn't any choosing.
You can skip it if you want, but they're still going to put it in front of you, as opposed to a cafeteria sort of a menu or Luby's cafeteria where if you're giving clients all these choices, and you're just standing there waiting for them to give you the order, then you become more of a client-driven firm, and you're not driving that relationship forward. Those are the five areas, the things that happen when you haven't thought through the service offering design as well as you could.
Blair: I'll just clarify AM, PM, you mean account manager versus project manager. We've talked about the difference in the dynamics and those relationships in a previous episode. In The Catbird Seat, I'll point out, that the best meal I had in North America but that was a different chef ago. I don't know if it's still as good, but it's a great restaurant in Nashville.
You've referenced a couple of times that you've got a mantra that you'd love to leave people with, is now the time?
David: Sure. It's very simple. I hope it resonates with people. It's this phrase, most of your clients should use most of your services most of the time. Now, I don't know what that percentage should be, but let's just presume it's 80% or something. You back away up into the new business process, and you are deciding whether a prospect is a good candidate to be a client, you say, "There's lots of other things like, are they big enough? Have they used a firm like yours before, or you have access to decision-maker, yada, yada." All those things that we've talked about a lot.
One of the other questions you should be asking is this, "Will this prospect use most of our services?" If they aren't, then you should pause for a second, decide whether or not you really want to work with this client because you design your service offerings, which then flows into the people that you hire to do these things for clients. You design them with a particular path in mind. When you deviate from that path, all of a sudden, this department or these two departments, or whatever, they have less to do because the client isn't going to be using those services.
Most of your clients should be using most of your services most of the time. That's the mantra for service offering design, and it needs to be way more intentional that it is. You don't just throw something on your website, and then let clients choose, "Okay, I want these two out of the seven things that you do." Now, obviously, you're going to do that sometimes, but ideally, the best clients are the ones who use most of your services most of the time.
Blair: You would measure your current client base and the services that they're buying from you against that statement and ask, "Is it true?" and if it isn't true, then it's reading between the lines here, it's time to revisit your service offerings, and maybe model out a new set of offerings. Maybe it's as simple as just pruning some.
I want to come back to your second hallmark of poor service offering design, and that was this idea of fragmentation, that you have entire departments that are frequently underutilized. You made the point that a 30-person firm, it's competing against 5-person firms, as an example, because they have these different service offerings, and they're, basically, these different businesses each selling its own service offering.
There is the idea of practice areas that is valid in larger and growing companies, is there not? If you think of a 100-person firm that has, say, three distinct practice areas, would you start to apply that mantra to the practice area itself? Because it seems to me that as businesses grow, and you build these practice areas, you really, in effect, start to build real three different legitimate businesses under the same brand.
David: Yes. I think in that example, then it's less of a problem. For instance, if you think of a large law firm that might specialize in M&A work and taxation and IP, well, they don't feel like they can only work for clients that are going to use all three of those departments because those three departments operate pretty much independently. They've got different partners that are scooping up business in a new business setting, and they hire, and they staff differently.
It's almost like independent firms working under the same roof. In the firms that are listening to this, they usually have more of an integrated service offering and in that world where they don't operate independently, then they need to really operate together, and all of them need to be solving the big problems. Otherwise, you lose one of the biggest advantages you have been a larger firm, and that's that you're a larger firm. That you can solve big problems that smaller firms can't solve. If 5 of your people out of 30 are solving a problem for a client, well, they could get the same thing at a five-person firm too.
Blair: All right, we're talking about designing your service offerings. We've discussed the hallmarks of poor service offering design, and you've shared with us this core principle or mantra that most of your clients should use most of your services most of the time. What are the principles of good or effective service offering design?
David: There's five here. I would start by just noting something that McKinsey came up with many years ago, and they call it the consumer decision journey or the CDJ, you'll see it referenced like that all the time. That's simply to decide what your CDJ is. When would a typical client come to you? What are you going to do for them at first, and then what would be the logical thing you might do next, and then next, and then next? That path would not vary all that much. Whatever that number is, I just threw out 80% earlier, but 80% of your clients would follow that same consumer decision journey with you.
Determine what that is in your world, and that's where I would start. Just figure out what that is as opposed to just taking clients wherever they come to you. There's an ideal starting place, an ideal next place, and next thing they do is the end and that would be the first.
Blair: Making note here. We're going to do this at Win Without Pitching. My team will say, "We've already done that, go back to podcasting."
David: Wake up, please. Catch up with us, we're ahead of you. Then the second would be to apply that to your screening process. Add that to the kinds of things that you're looking for when you evaluate a prospect fit. In other words, are they going to use most of our services? Are they going to use them in the order we want to do it? We talk about this a lot in terms of upstream. If a client is hiring you to implement something, and you get uncomfortable with that, you'd like to do what I call the first room stuff instead of the second room stuff.
You would very seldom deviate from that because you want clients to hire you always for this thinking first. You don't even care too much if they go to that second room and hire you to do the recommendations or the implementation, but you're never going to work for a client unless they do this first stuff first. Part of the screening process is being aware of that consumer decision journey, and evaluating clients to see if they're a good fit in terms of not just all those other things, but what services they're going to use from you.
Blair: Would you overtly share that journey as a screening tool with a prospective client?
David: Yes, absolutely.
Blair: Could you see saying, "Hey, this is the path most of our clients take and this is where we engage with them initially, and then almost always, we move to these other issues or areas."
David: Yes. I think even putting it on your website even before you give a verbal explanation to a client, for sure. Then you might say, "Listen, I know, this doesn't fit right now, I just want you to know the way we normally work. We'll make an exception here, but probably next project, we need to stick with this." We understand why you need to dive in and just do this right now, but it's unusual for us to do that.
Blair: I think a good way to think about the exceptions, we talked about this when we were discussing buyer types recently. I said, you sell excess capacity to price buyers. I think you think about project work the same way. That work where somebody comes to you with a one-off, you don't want to build your business on that, but you'd say to the client, you would share this map or consumer decision journey, as McKinsey calls it, with them and say, "We provide these services along the arc of this path or this journey, but if you only need this one thing, I'll check, maybe we have some capacity, and we'll do it."
You come back and say, "All right, we can do this." I have other criteria about project work, like you shouldn't have to compete for it, et cetera, et cetera, but you would think of that project work, that client who's just going to take one service once and leave. You would think of them as filling the spaces in your inventory, I guess.
David: That leads to the third one too, in that I feel like you ought to prioritize the clients who follow the standard path. By prioritize I mean, when you think about scheduling if a client comes to you and says, "Okay, we want to skip these next two things and go straight to that," then you might have to say-- I mean, you wouldn't make this up, but if it's true, you would say, "Oh, we've already reserved capacity for this. We're probably not going to be able to do that."
In your scheduling, how do you prioritize clients? What are the factors that allow you to keep responding responsibly to clients? Well, part of it is how they treat you. Part of it is are they following a prescribed path and not dumping surprises on you along the way? Prioritize them, that's the third point.
Blair: Another way you would prioritize them is how much money they're spending with you and if somebody's using most of your services most of the time, they're spending more money with you, typically.
David: Imagine how much easier it is to predict capacity and figure out staffing, how much you need to use, contractors, and so on.
Blair: There are a lot of sleepless nights head by agency owners over not just the sales front, but the capacity and the planning front waiting for, "Hey, I thought we were going to be working on this now," avoiding log jams, et cetera.
David: I don't know for sure but I suspect that a lot of the falling short in the profitability department comes from underutilized people. The people are smart, the pricing is good, they've got great processes, but some department is consistently being underutilized. That is going to show up from a profit standpoint. That's how service offering design to me has such an impact on the results of your business when you think about keeping them all busy.
Blair: All right, what's the fourth principle of good service offering design?
David: This one we've talked a lot about, I forget the name of it. Was something like staging your client engagements or something like that.
Blair: Phasing your engagements.
David: Phasing, yes. There's a whole episode we did on this so we don't need to talk about it too much. It's starting with some diagnostic or a plan or a roadmap or something like that. It's not as important that clients finish in the same place with you as it is that they start in the same place with you. Whatever this consumer decision journey is that you're designing, it should almost always start at the same place. That's the phased client engagement side. This is essentially doing what you would've done if you'd have written a 90-page proposal for free, and now you're getting paid for it.
The benefit to the client, in addition to just being a really great way to sample what it's like to work with you, is that you're pledging to spend the rest of their money really smarter because of all this pre-work that you've done before the rest of it happens. That's fourth, start with some diagnostic plan or roadmap, whatever the CDJ is, it should start with something like that.
Then the final one is just to think about, okay, so you have this way to start it and then you have the three or four things you do in the deep parts of the relationship, but where people probably could do some more thinking is, what do you do after that to stay involved with a client to whatever degree you want to? You may not want to. Sometimes this recurring revenue stuff can bite you in the butt, but if you want to stay involved with clients, what are some more episodic ways that you can do it that deliver really high value to clients? You tack those on to the service offerings. They're obviously optional.
Again, we don't care as much about how the relationship ends as much as the way it starts, but I'm talking about things like analytics and adjustment. You come in every three months or something, or maybe it's training their people so that they don't need you as much, or helping them staff the department or something like that.
It could be refreshing a content library, maybe some certification, whatever that is, but as important as how they start, how they end can be really interesting to think about. We're really good at designing the middle part. We're not as good at designing the first and the way that things end. If you really do a good job of service offering design, there's a lot you can do to think about, okay, how do you keep the client close to you and still make money on them without them getting tired of you? Those are the things that you're trying to balance on an ongoing basis.
Blair: It's really profound to me, observation that we tend to be really good at designing the middle part of the service. Then once we nail that, some of us get pretty good at the front end, at the diagnostic phase, and get pretty good at charging for it. To your point, it's highly reassuring to the client when you do this properly to spend a little bit of money upfront to ensure, almost as an insurance policy, that the remaining money will be spent wisely.
Then that last part about some form of audit or measurement that allows you to keep tabs on them as they self implement or take the work that you've done out into the world to make sure that things don't drop off that performance levels, whatever that means, remains high. You're getting paid to keep an eye on things and then come back in or you have the opportunity to come back in when you see where it makes sense to do so.
The best evidence for the fact that we're really bad at the final phase is because we keep getting fired by every single client. It may take a year or it may take five years but we're always getting fired by our clients. We're obviously not all that good at the final phase of service offering design.
David: Yes, and some firms, just in the nature of what they do, it's harder to come up with that type of offering. I think it's worth exploring for every firm.
Blair: I think there's a lot of opportunity there. You and I both can think of probably a couple dozen firms where we thought, "Wow, these guys are really good at new business, but they sure lean on it a lot because they can't seem to keep clients."
David: A lot of people come in the front door but a lot of people go out the back door too. I was just on the phone with a client this morning and obviously, I'm going to look at the website. I didn't know anything about them except what I learned on the website before the call. This is an example of what you're not trying to do. They focus in healthcare, government, corporate and consumer transportation, nonprofit, and energy. I'm thinking to myself, "Okay, what is not covered there?"
Blair: Pet stores.
David: Then the service offerings are branding, advertising, digital public relations, and social change. Well, this to me smacks of somebody sitting down and saying, "Okay, what's our service offering design? All right, somebody give me a list of all the people we've touched. Now, somebody else could get me a list of all the things we've done for them." Then you end up with a Cheesecake Factory menu. That's what this looks like.
Instead, I'd love for there to be more cohesiveness, not only in your client base but in what you do for your clients too. Let's say you've got 11 things you do, well, maybe you ought to have 8. Let's say you've got 6, maybe you ought to have 4. There's just room to recognize that over time things tend to spin out of control and you've got to come back and clean it up, a spring cleaning every day. It's spring right now, maybe this is the time to do it.
I like this topic because it's short and sweet and it just gets people thinking. Without a whole lot of direction, it just helps them think about it. What I'm most interested in is people taking this stuff and applying it in a new business setting where they tend to favor the clients who are going to use all of the departments equally the way the departments are designed. That makes for a much better experience for the client and much better experience for your team.
Blair: Maybe you've said this already and I've missed it, but do you have a target for how many service offerings a typical firm should have? When they start to think about adding new ones, they should think about dropping one before they exceed that target?
David: Yes. The target is fewer.
Blair: Fewer than what you have now?
David: Yes. No, I think three to six is just about right, somewhere in there. It's really hard to pontificate without knowing the specific firms, but fewer would be the smarter answer but probably three to six, something like that, would be really healthy. These are the kinds of decisions that they aren't emergencies, you can think about them carefully. You could even say, "All right. For the next three months, let's see if anybody buys this," or, "Let's see who's going to pay a premium for this."
That would be another question because really our positioning and our service offering design is not intended to keep us busy, it's to deliver a premium pricing experience for us. Will they pay a premium for this, or if they won't, will we lose the client if we don't do this?" There's lots of really interesting questions to ask yourself.
Blair: I love the exercise of asking. Okay, if we've got all these service designs, if we could only have one, what would it be? Right. Okay, here's the one. If we could add a second one, what would it be? Okay, it's our lucky day, we get to add a third, what is it? Then just sit on that for a while, these three. As we've said before, there's no growth without pruning, so I really like this idea. Thanks for this, and you know what? Maybe it makes sense for one of your service offerings to be service design.
David: Oh, what a great idea. I wish I'd thought of that.
Blair: Then we will have covered both topics. Thanks, David.
David: Thanks, Blair.