Chapter 1. Why Service Design?
Service design has developed in response to the new challenges facing organizations today. In an accelerated, connected world, customers1 are more knowledgeable and empowered than ever before. To satisfy them we need to understand their needs better, and to deliver great experiences—not just great products—we need to innovate quickly and cheaply across silos. One proven, effective, and efficient route is via design.
Today, design plays a major role in solving wicked problems. Organizations are trying to use the capabilities of design to move beyond the given and to infuse a different way of working and thinking into systems. Often referred to as “design thinking” or “service design,” commercial organizations all over the world hire design agencies, build in-house capacities, and merge with and buy design agencies. They create innovation labs and change the physical working environment to foster and symbolize a new way of thinking and working.
Birgit Mager, Professor of Service Design and President of the Service Design Network
The Challenges for Organizations
In many ways, service design and similar activities are responses to a changing world. As we learn more about customers, we see that the traditional structures and behaviors of organizations are becoming increasingly out of date. The following sections explore some of the things we are struggling with.
Customers and Organizations Don’t Focus on the Same Things
Every organization has a core offering: hospitals make you well, automotive companies build vehicles and provide mobility, hotels give you a roof over your head, accountants do your bookkeeping, and so on.
Traditionally, organizations have focused heavily on those core offerings, and they want to “get it right.” To them, their job is to optimize the nuts and bolts of their activity—like the hamburger restaurant that invests heavily in new recipe development. Or they work hard at sales and brand communication, like the bank that strives to present a consistent image of trustworthiness. But is this core offering what the customer really cares about?
In one study, researchers asked tens of thousands of patients about the factors that led to their hospital visit feeling satisfying or not.2 Of course, people go to the hospital to be healed—but in the study, none of the top 15 satisfaction factors related to whether or not the patient’s health improved. Instead, most of the top factors related to interpersonal interactions, including things like information flow, empathic and polite nursing staff, patient inclusion in decision making, and the feeling of being cared for by a well-motivated team.
As customers, it seems that we are less influenced by the core offering than by the layers of experience around it (see Figure 1-1). The behavior, manner, and tone of the staff member (or machine interface) we are dealing with; that person’s or system’s knowledge of the offerings and operations; the processes (for example, sales or refund routines) carried out by staff; the systems and tools (logistics, billing, point of sale) run by the organization—all of these are between us and the core offering, and they are what make the difference.
Figure 1-1. The experience of an organization’s offering is filtered by customers’ perception of its behavior, expertise, processes, systems, and tools; they only perceive our solutions through the veils of all these layers, usually starting with the outermost3
Of course, were we to focus on hospital patients who did not experience a good medical outcome, the situation might be different. But until things go wrong, it seems that the core offering of the hospital—healing—is taken for granted by the patients.4 We rate—and recommend—organizations not on their core competencies, but on other, experiential factors. So at the hamburger restaurant, eaters actually care more about a warm greeting than an exciting new burger recipe. At the bank, clients worry more about the awful login process on the website than about trusting the institution.5
So how might organizations understand better what their customers value, and use their knowledge of customers to systematically make that experience better?
Empowered Customers
The digital revolution has made customers’ demand for good experiences even more powerful. Where they once were often forced to take what they could get locally, they now have a huge choice. Indeed, it is often easier to buy from the other side of the planet than from the store across the street. Customers have many channels for information or for purchase, even within one provider, and will switch between them at their convenience. Price comparisons, alternative sources, trusted reviews, and a wealth of other data are just a screen away.
Social media amplifies this change, as customers seize the opportunity to share experiences with potentially millions of others. Conversations online are reshaping business,8 as users trust their peers far more than expensive advertising campaigns. In business-to-business (B2B) services, word of mouth (WOM) fulfills the same role, with employee and customer referrals often named as the most effective sales generator.9 Whatever the numbers, we agree that when an organization messes up, the world will be told—and people will believe what they hear.
Customer experience makes a difference to the bottom line, as plenty of studies have shown. Back in 2010, a meager 36% of companies were competing mostly on the basis of customer experience, but just a few years later (2016) a whopping 89% of companies expected that to be their main battlefield.10 Companies that excel at customer experience outperform the market11 and are more likely to be recommended by customers and to see customers return and buy again.12 Most customers are willing to pay more if they are sure of a better experience.13
Focusing on customer experience is crucial, so why do so many organizations get it wrong? One of the answers is the way organizations are set up.
Business tools and methods emphasize standardization and scalability of an offer, and connecting with people by advertising through mass media channels. This approach has a limited ability to understand and affect the new realities of customer experience.
Silos
Since industrialization, through movements like Taylorism14 and total quality management,15 organizations have focused on operational excellence and reducing waste. Whole organizational units (we often say “silos”) have been constructed around work functions that make sense to the company, understanding, tracking, and optimizing these functions within the silo and from the company’s perspective—not the customer’s.
For example, when you buy your running shoes, the advice process might be designed by the Sales department, and the salesperson’s soft skills and specialist knowledge taught by HR. The salesperson will use sales and stock systems developed by IT, explain a returns procedure drawn up by Legal, and finally sell you a pair of shoes designed by R&D or bought by Purchasing. The situation becomes even more tangled as your relationship with the company grows longer and more silos come into play.
Of course, these silos try hard to work together—but how exactly should this happen? Different suborganizations have their own viewpoints on what is important, their own measures of success, their own key performance indicators (KPIs). Tools like process diagrams generally only include the customer if they’re necessary for part of the process, or even exclude them completely. Even “Voice of the Customer” charts and quotes are often so widely shared that they lose all context and real customer needs are forgotten. And crucially, there are many parts of the customer journey that are important to the customer, but which do not appear at all on traditional process visualizations—like waiting, third-party reviews, or discussions with friends.16
So, put a cross-functional team in a room together and—where should they start? Usually the basic tool of such cooperative attempts is the meeting, where the teams are faced with the colossal task of reconciling different worldviews and different terminologies by basically talking about them. It’s no wonder that cross-functional cooperation is extraordinarily difficult, as each delegate honestly argues for their own point of view using their own specialized language.
How can we make it easier for these people to cooperate and create new value together, so that each department sees the results as its own and is invested in their success? And how can we help them to orchestrate experiences across their silos, working together to create real satisfaction?
Meetings are one of the most painful yet underestimated problems of modern business. In this context, a design-led approach is ordinary yet extraordinary. Meetings are no longer where your ideas go to die.
The Need for Innovation
Most organizations see innovation as something necessary and desirable, and prioritize it as a goal in their work. The need for innovation is driven by a changing and super-connected (business) world, an immense shortening of business cycles, and a general ubiquity of technology and information that makes it easier than ever to copy, turning unique selling propositions into commodities overnight. Like free WiFi in hotels (once an exciting novelty, then a quality factor, now an expectation), yesterday’s innovation is soon out of date and a new one is needed.
All this means that many organizations prioritize innovation as a key success factor. And as service becomes more and more visibly important for every business, the focus of their innovation turns to services. They attempt to meet the multilayered needs of users, not just impress with flashy new ads or product extensions.
So, where can today’s companies look for ways to understand the needs of their customers in a way that will provide useful insights and spark interesting ideas? How can they work on those ideas in cross-silo (or cross-organizational) teams, diversifying, filtering, testing, and evolving concepts until they are implemented as new or improved offerings, operations, or even business models? How can we innovate better and cheaper?
Metrics Are Only Part of the Answer
When organizations understand the importance of customer experience, they often start tracking satisfaction. The most visible tools are online and offline surveys, and the Net Promoter Score (NPS)17 in particular, with countless organizations asking “How likely is it that you would recommend our company/product/service to a friend or colleague?”
This useful metric faces the challenge of many quantitative measurements: when your NPS slumps, you know that you have a problem, but not why. Strong Voice of the Customer loops and listening points can show more, but do not in themselves offer solutions. They tell you how big your problem is, and perhaps where it comes from, but not how to fix it or how to innovate.
So, organizations are looking for new, reliable, and scalable ways to move beyond measurement and innovate experiences strategically across silos. Increasingly, they are turning to what we call service design.18
Origins and Progress
While the term “service design” might be unfamiliar to many US readers, it has developed rapidly and has exploded into innovation in service organizations in Europe. It seems likely to follow suit in the US and elsewhere—because it solves the problems that organizations have right now.
Service design grew out of design methodology in the 1990s and 2000s. It is part of a strong movement applying the mentality and process of the design studio to problems outside the traditional fields of design, such as holistic customer experiences, service systems, public services, and even military activities. In terms of Richard Buchanan’s influential four orders of design,19 it is usually placed in the third order—problems of interactions—but increasingly shifts into the fourth as it addresses and integrates cultures and systems. Figure 1-2 shows Buchanan’s framework, with service design added by the authors.
Figure 1-2. The place of service design in Richard Buchanan’s influential four orders of design
Crucially, service designers represent only one of many professions that create and shape services, including systems engineering, marketing and branding, operations management, customer service, and “the organization.” Most of these people are designing services, but until recently, most had never heard of service design.
That is changing. Today, customer experience has become overwhelmingly important for many organizations, and design (more usually, “design thinking” or “service design”) has become a key driver in innovation and management. Many large organizations have permanent capacities in service design—and it’s a standard part of, say, government service development in the UK, automotive industry projects in Germany, and the majority of healthcare projects in Norway.
It’s also effective, even on the bottom line. As early as 2007, the UK Design Council had already linked design and shareholder value, showing design-led companies beating the FTSE by 231% over 10 years.20 In 2013, the Design Management Institute (DMI) showed that design-centric organizations had outperformed the S&P by 228% over 10 years.21 And most recently, McKinsey looked at 100,000 “design actions” in 300 companies and found that those with the highest Design Index scores (the top quartile) had enjoyed 32% higher revenue growth and 56% higher shareholder return over the previous 5 years than their industry counterparts—across “physical goods, digital product, services,” and combinations of these.22
In Conclusion
Sitting at the intersection of design and customer experience, service design is now more visible and successful than ever. Service, as it is traditionally defined, is often said to make up the lion’s share of most developed economies.23 And design is the process of making sure something fits its purpose—so service design can potentially be applied to the shaping of much of human activity. At the very least, it has a place in incremental and radical service development, in innovation, in the improvement of services, in customer experience work, in education, in empowerment, in government, and in the strategy of organizations.
So service design is visible, growing, and effective. But what actually is it?
1 In this report, we will generally use the word “customer” in its broadest sense as someone who receives the value we produce. In your world, you might use other words like “client,” “user,” “patient,” “colleague,” “citizen,” “stakeholder,” or “boss.”
2 Frampton S., Gilpin L., & Charmel P., eds. (2003). “National Patient Satisfaction Data for 2003.” In Putting Patients First: Designing and Practicing Patient-Centered Care. Jossey-Bass.
3 This six-level model is the authors’ adaptation of Swisscom’s five-step model. See, for example, Oberholzer, G. (2011). “Customer Experience—wie vermittle ich das meinen Mitarbeitenden? – CEN-Xchange Mai” at https://stimmt.ch.
4 This phenomenon has been well documented and researched since the 1960s—e.g., Herzberg’s theory on motivators and hygiene factors: hygiene factors contribute to dissatisfaction if they are missing, but do not contribute to satisfaction if they are present, while motivators do. See Herzberg, F. (1964). “The Motivation-Hygiene Concept and Problems of Manpower.” Personnel Administration, 27, 3–7.
5 Burger and bank examples both from Tincher, J. (2012). “The First Key to Creating a Great Customer-Inspired Experience.”
6 See the textbox “Service design and service-dominant logic” in #TiSDD Section 2.1, Defining service design. See also Vargo, S. L., & Lusch, R. F. (2004). “Evolving to a New Dominant Logic for Marketing.” Journal of Marketing, 68(1), 1–17.
7 See Christensen, C. M., Anthony, S. D., Berstell, G., & Nitterhouse, D. (2007). “Finding the Right Job for Your Product.” MIT Sloan Management Review, 48(3), 38.
8 This was already pinpointed in The Cluetrain Manifesto back in 1999. See Levine, R., Locke, C., Searls, D., & Weinberger, D. (2010). The Cluetrain Manifesto. Basic Books.
9 Implicit; reported for example in eMarketer. (2015). “Referrals Fuel Highest B2B Conversion Rates.”
10 Sorofman, J. (2014). “Gartner Surveys Confirm Customer Experience Is the New Battlefield.”
11 See, for example, Watermark. (2015). “The Customer Experience ROI Study.”
12 See, for example, Temkin Group. (2018). “The ROI of Customer Experience.”
13 See, for example, RightNow/Oracle. (2011). “Customer Experience Impact Report.”
14 Taylorism, or scientific management, is a production efficiency methodology from the early 20th century. It was based on dividing work into the smallest meaningful subdivisions, each of which could be measured and optimized to ensure the perfect flow of actions by the worker.
15 Total quality management is a business methodology most famous in the 1980s and 1990s that attempted to continuously improve the quality of products and services using feedback loops and the systematic analysis of work processes.
16 Read more on proposition-centered journey maps and experience-centered journey maps in #TiSDD Section 3.3.1, A typology of journey maps.
17 Reichheld, F. F. (2003). “The One Number You Need to Grow.” Harvard Business Review, 81(12), 46–55.
18 Service design? Other people might talk about design thinking, service design thinking, new marketing, user experience (UX) design, holistic UX, customer experience (CX) design, human-centered design, CX management, experience design, touchpoint management, Lean UX, new service development, new product development, customer journey work, or innovation, to name a few. Others will notice similarities with Lean Startup and Agile development methodologies. We don’t care what you call it—what matters is what you do and how you do it. Still, you might want to watch out, because some people have very strong opinions about what exactly terms like service design and design thinking and all those others really mean. Other people are quite relaxed—for example, some people will use the term “service design” to refer to almost any kind of service development work, while others will point out that strictly the phrase refers to one particular approach with its historical origins in the design studio. It might get a bit tricky when these people try to have a conversation about “service design” without realizing they mean very different things. With “design thinking,” the situation is even worse. Does the person mean this great approach, or that splendid version, or do they mean every way of applying design principles to business challenges? There are certainly many flavors available—fortunately!—and they all have something to offer. But dwelling on the differences is not always useful. On the whole, unless you really enjoy this kind of discussion, we think you are better off just getting on with doing it.
19 Buchanan, R. (2001). “Designing Research and the New Learning.” Design Issues, 17(4), 3–23.
20 Design Council. (2007). “The Value of Design: Factfinder Report.”
21 DMI. (nd). “The Design Value Scorecard.”
22 McKinsey. (2018). “The Business Value of Design.”
23 From the point of view of service-dominant logic, it’s basically everything.