Why cost effective service excellence isn’t an oxymoron

Singapore Airlines is a model of cost effective service excellence
Growth leaders are challenged continuously to improve service delivery and reduce costs at the same time. Many excel at one or the other of these business imperatives; but few succeed at doing both at the same time.

dglogoWhen I first spoke with Jochen Wirtz, Professor of Marketing at the NUS Business School, about participating in our Driving Growth series, I was delighted when he suggested the theme of “cost effective service excellence” – an area in which he has deep expertise.

His research and teaching offer great insights to leaders of companies that rely on services for growth.

jochen280Professor Jochen Wirtz: “There are ways to deliver excellence, while also having low costs”My conversation with Jochen has been captured in two videos: The first video focuses on two business model innovations: 1) a dual-culture strategy and, 2) building a focused service factory or industrialised services strategy (watch part one here). The second video explores how companies can leverage technology and self-service in pursuit of low cost service excellence (watch part two here).

From our conversation I’ve pulled out five key takeaways for growth leaders looking to deliver excellent service and, at the same time, cut costs:

Know what you want to be, and to whom

Effective strategy is often about saying no. Leaders who want to drive a “dual-culture” or “focused service factory” strategy succeed with great focus on knowing whom they wish to serve and how.

bed280In the case of Singapore Airlines, this starts with an understanding that the airline must engender loyalty from business travellers who will pay full fares for whichever class of travel they purchase.

Everything that touches this target customer is high-end – designed to perfection and executed to world-class standards. But move away from anything that directly touches the customer, and you’ll find operations that are frugal and obsessed with lowering costs.

Doing this effectively requires building a working culture that employees at all levels understand and are committed to.

Ensure all your people are 100% clear on the business model you are pursuing.

Cut costs and invest where it matters most

To achieve service excellence at a lower cost, leaders must think about the entire work system involved.

google280In the hospitals of India’s Narayana Healthcare chain, for example, babies who have had open heart surgery are each allocated a full-time nurse to monitor their recovery. The hospital chose to invest in the care of this professional because they know that the cost of a complication is far greater.

Another example from Jochen is that of Google. In this high-tech giant, it’s very difficult to add headcount – but investments in scalable solutions are enthusiastically pursued.

In both organisations, the decision of where to spend and where to cut cost is tightly linked to their business model. This is a work-system focus and too many businesses lack this discipline.

As a growth leader, keep cutting costs in the right places and target your investment intentionally.

Develop expertise used to execute the business model

Many organisations have specialists that are separated into siloes. These siloes prevent them from delivering great service to their customers.

hospital280India’s Narayana healthcare has been a pioneer in low cost, high quality health servicesThe structure of the Narayana hospital chain is an example of a focused service factory. Their business model drives deep expertise in heart surgeons and related specialists.

But they don’t stop there. They rotate these experts into different roles related to their core business and help the teams work together. Because the entire organisation is aligned with their “service factory” model, the work is performed at rock-bottom costs.

Repeating similar work nurtures functional expertise – but bringing people together to deliver excellent service and rotating people around the various jobs in the team ensure that the experts stay motivated, keep learning, and connect their skills to one another.

Do your experts work together seamlessly to deliver the best service to your customers at the lowest cost possible?

Go beyond customer satisfaction

Across each of the examples Jochen provides – it is clear that delivering service excellence at a cost lower than the competition requires deep insights into what is important to a customer.

For business customers, satisfaction is typically related to how the customer performs as a business because of the service rendered or how they can deliver something to their own customer.

Just as important are deep insights into how the business is delivering against this.

Work processes have to be designed that begin and end with the customer in mind. Measures then must drive performance of the entire process or system and not simply reward people in parts of the chain for their performance.

Ensure your teams are perfectly clear what success look like for your customer and align around this to deliver.

Think big, act small

execprogramme-referralWhen speaking about technology as an enabler of cost effective service excellence, Jochen suggests that the best are those who start with clear objectives for the technology, implement on a small scale at first, and then adapt and learn as they go.

This is great advice for all growth leaders – whether for technology or anything else that impacts the customer experience.

Because services don’t exist without someone to serve, we can only truly know if it will work when it is implemented with customers. This has to be combined with the kind of humility that drives a lot of listening and learning.

Ask yourself what you are doing to promote a learning culture that is constantly driving improvements in your customer experience at lower costs.

I thoroughly enjoyed my conversation with Professor Jochen Wirtz and hope you gleaned great insights for your own business.  Clearly, leaders who want to create sustainable growth must consider strategy, organisation & work design, and execution as a three-legged stool.

I hope these ideas are useful to use and I encourage you to share your own thoughts on driving growth and business model innovation in the box below.

  • Author Profile

    Alison Eyring is the CEO of consultancy Organisation Solutions and an adjunct professor at NUS Business School teaching in the MBA programme. She is the founder of the CEO Roundtable for Driving Growth in Emerging Markets.

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