Business services include a wide range of non-financial services that help a company operate. These services can include advertising, marketing, management consulting, information technology, travel and logistics, waste handling, staffing, security and a host of other activities that keep a company running smoothly.
The business service industry is one of the largest in the world, accounting for 11% of total EU GDP and employing around 12 million people across the European Union (EU). It provides services to a variety of sectors, including manufacturing and trade.
Compared to product businesses, service companies are often difficult to define. They don’t have the physical reality of a product to guide their management practices, and they rarely benefit from economies of scale in production.
As a result, many managers have difficulty understanding how to manage these kinds of businesses effectively. In particular, they struggle to get the four critical elements of a successful service model—intangibility, inseparability, customer involvement and inconsistency—to come together in practice.
Intangibility: A service doesn’t have any physical form like a product does, which means that it can’t be stored for future use and needs to be delivered each time it is demanded by the customer. It’s also more difficult to produce a service because it can’t be reproduced.
Inseparability: As a result, services are more difficult to provide on a large scale. They need to be performed exclusively each time they are requested, and because they don’t have the same quality control as a product, they can’t be produced in bulk.
Nevertheless, service-oriented business models do have important advantages over product-oriented ones. They allow managers to focus more on the customer’s needs and expectations, which are essential for business success. Moreover, they can also be more innovative and creative. That’s why they are so attractive to managers who are looking to develop more entrepreneurial leadership styles.