Do these examples prove service design is a CX differentiator?by
Why is service design so important for differentiation, and how have organisations used it to move from a product-driven approach to an experience-based philosophy?
In the midst of the present digital disruption, companies are under pressure today to ‘innovate or die’ - there’s an unprecedented amount of small, nimble companies appearing and succeeding almost overnight. So what do you do if you’re not one of those companies?
Unfortunately, there are many challenges facing businesses today.
- A lack of or slow innovation: Many large or traditional companies struggle to really innovate and differentiate in a noticeable way. The effect of innovation is incremental changes but nothing very powerful. The other side of the coin is that they can innovate but by the time a project has moved through an organisation from idea to reality, the world has moved on.
- No focus on the customer: Companies do not have the resources or channels to really understand what customers want. This coupled with a fear that a nimble, silicon valley giant will re-invent their business, or even their market, can mean that the focus is misplaced to meaningless rather than effective innovation. No one wants to be the next Nokia or Kodak.
- Unprepared for the service economy: We are moving to a service and experience economy. Today the service economy accounts for 72% of the UK’s GDP, the added value created by services is greater than that of products, according to the Office of National statistics. But no one really knows how to leverage this opportunity.
- An obsession with digital first: Omnichannel solutions are complex to handle, companies don’t know where to start. It seems that there’s a new channel every day, each with it own challenges such as cost and integration. ‘Digital’ is seen as the quick fix, something controllable and scalable. Everyone is doing it, talking about it and “you could be the next Airbnb or Uber!” But humans don’t think in channels, life is invisibly omnichannel. We buy experiences. 50% of decisions are made by emotion, not rational decisions.
This is where service design holds the key.
The service design approach
People use Airbnb or Uber because it is a compelling service, it answers a need and it is great value for money. Both companies sell a very physical experience, a holiday or a journey, but the service itself manages millions of homeowners and travellers, or thousands of minicab drivers and passengers. The experience is human-to-human. Technology is just the enabler.
Both Airbnb and Uber used a service design approach, working out at what humans really needed. Airbnb discovered the desire for a place to stay without the baggage of a hotel and provided the missing piece: the trust between a homeowner and their guest. Uber connects people that find themselves in any location with their nearest registered driver, also a building the core human need for their taxi model to work - trust between a driver and their passenger. Essentially, both companies created a successful new service using service design.
The service design process works through three key areas: true customer understanding, human to human (interdisciplinary) collaboration and iterative prototyping.
- True customer understanding: Service designers dig deep into customers’ needs and motivations. This is used to inform whether or not to improve the existing user experience or create a new one. Service design is also channel-agnostic because customers don’t think in channels. Service designers see a problem through the eyes of a customer, identifying the pain points of exiting experiences that you didn’t even know about. Focusing on the biggest value-add for the customer which is vital for growing revenue and loyalty.
- Human-to-human collaboration: To ensure all stakeholders of a project buy into it, service designers co-create at all times with partners and employees. It will lead to a better chance of the project being implemented. Airbnb would not exist if only travellers or homeowners were happy. Similarly for Uber with drivers and passengers. Both sides have to feel fulfilled, co-creation is key. This close collaboration will also encourage a customer-centric culture within the company.
- Iterative prototyping: Fast iterations dramatically reduce the risk and time to market, allowing companies to innovate safely and quickly.
Yhteistyöapteekit (YTA), the largest pharmacy chain in Finland, recently ran a transformational project that incorporated these three elements.
Pharmacies in Finland are traditionally focused on selling medicine while they very seldom offer outstanding customer experiences or any kind of wellbeing services. However the Finnish pharmacy industry began to face radical challenges. The Government effectively diminished returns of the sales of prescription medicine as customers can now more freely choose between cheap generic drugs and brand name patent-holders. YTA needed to create new wellbeing services to differentiate themselves from their competitors.
The result of a two-year service design project, involving research, ideation, concept design and testing was the new ‘People’s Pharmacy’ concept focused on improving customers’ wellbeing with significantly better customer experience and new health services.
The service model was co-created and prototyped with the pharmacy’s customers and employees. It was derived from a staggering 198 service improvement ideas, into new concepts that will best serve not only the customers and employees, but also future health care and wellbeing trends in Finland.
The first People’s Pharmacy opened in Helsinki in 2015. The new holistic wellbeing offering can be seen in the extended product range, outstanding interior design, unique and scalable prescription service model, mobile staff and clear market advantage.
In terms of evidence that service design truly did help YTA compete, it reported:
- 47% growth in customer volume.
- 4 out 5 customers extremely likely to recommend.
- 69% growth in prescription drugs.
- 300% increase in sales of new wellbeing services.
Furthermore, the Service Design Network also recognised the project in their global service design awards.
A true service design project will add value to the customer, the business and the employees. In the case of YTA, is also impacted the entire marketplace in Finland.
So why is service design so important for differentiation?
We’re moving from a product-driven economy to a service- and experience-driven economy, and we believe that this involves a change in business from traditional value chains (B2B and B2C) towards co-creation and a service dominant logic – human-to-human (H2H).
It’s a huge business opportunity - the service economy accounts for 72% of the UK’s GDP, so there is a huge potential. Also, the design value index shows that companies, who have invested in design, have increased in value by an average of 228% compared to the stock market average. Service design provides a framework for companies to compete in this customer-driven economy and is key for competitive differentiation.