We have a saying that we share with our clients when talking about service design: “Add value and money will follow.”

What this means is that you should look at your business - your expertise - and find small, inexpensive ways to leverage that expertise for the benefit of either your existing customers,or prospective customers. Often, the net effect is huge.

Why? Because, supposedly, you are the expert in whatever you do. And consumers these days don’t have time to be experts in all things. So they are looking for what we call “editorial filters,” the companies or individuals who know something they don’t, that can point them in the right direction, make their lives easier, safer, richer, more convenient, etc. These are the “trusted advisors” in our lives. You would think that the those vendors who make the most money from us (think lifetime value) would be most incented to actually be a trusted advisor, and not just a provider of a commodity service. (Think bankers, lawyers, insurance companies, mortgage companies, auto dealers, airlines, etc.)

So imagine my dismay the other day when Allstate Insurance - who I have been with for over 20 years and in that time have probably given them over $35,000 of my hard earned cash - sent me a “Happy Birthday” email. Really? A birthday email? Does someone at Allstate marketing really consider this a best practice of “customer relationship management?” Come on folks. This is 2009!

There a plenty of ways for Allstate to add value to our relationship beyond paying a claim I might submit on average, once per decade. How about using that same email to direct me to that online video about the horrors of texting and driving that I could then send to my teenage daughter? (You know I have teenage daughter - she’s on the policy!) Or how about links to defensive driving classes and offering me a 5% discount for taking it? Maybe you could send me the annual list of the top 10 safest cars, as rated by an independent agency? Tips on how to make my car last longer? Anything… except a gratuitous birthday email!

And these are ideas I am coming up with off the top of my head. This is YOUR business - cars, safety, driving, technology, best practices, statistics, data. You have thousands of employees and massive investments in collecting and analyzing all this information. So why don’t you share a bit of it with me - your customer - to make me a better driver, a safer driver - and ultimately a better customer for YOU?

But you better hurry, because statistically speaking I only have about 40 more years of driving (and insurance payments) left!

Need some help figuring this out? Call us - you’ll be in good hands…

We just added four new PDF case studies to our website, which can be found on our client list page. These include case studies about:

- ColorQuick, a software company developing game-changing technology in the printing industry. Our ethnographic research turned up new and compelling benefits for their target market.

- BlackGold BioFuels, an energy technology company that has a patented system for converting waste products into high quality bio-diesel fuel. We helped them design new services that support the technology product, as well as innovative new business models for rolling out their products and services.

- A major hotel chain and our work with them on designing new service revenue opportunities related to rapid developments in the Connected-TV space.

- A major luxury retailer and a series of card sort exercises we did for them related to a new product design initiative.

Also, after a number of requests from our business partners, we created a one-page executive summary about Frontier Service Design that can be downloaded here.

Read, learn and enjoy!

Last week the Wall Street Journal ran an article about Wi-Fi services available on airlines. Bottomline: people love it, but really aren’t willing to pay for it. Why not?

According to the article, “in tests and now in regular service, usage drops off considerably when travelers must pay for the service.” Even Alaska Airlines, which only charges $1, saw a steep drop off in usage. (By the way, Alaska Airlines is a “cashless” airline, so if you want the Wi-Fi, you have to pay for it with a credit card - ggrrrrrrr.)

So what’s going on here? Is the economy causing people to cut back on non-essentials? Or have people become so used to ubiquitous computing that they expect “the cloud” to envelope them everywhere, all the time, for free?

Or could it be - as we suspect - that sitting in an (albeit overpriced and cramped) airline seat at 35,000 feet is one of the last places where you can seek refuge from our “always on” world of instantaneous communications?

An interesting question to answer for sure, and one which has ramifications for service design in the worlds of travel, entertainment, and hospitality.

Starbucks is taking a page from Toyota’s playbook in their new focus on streamlining the coffee-brewing process. From bending over to scoop coffee from below the counter, to eliminating idle moments waiting for expired coffee to drain, an 11-person team is bringing the gospel of “lean manufacturing” to more than 11,000 Starbucks stores.

According to the Wall Street Journal, Starbucks says the efforts are already helping its bottom line, as shown by quarterly results last month that beat analysts’ expectations. However, there are some employees who fear that the new efforts will turn them into coffee-making robots.

This focus on streamlined operations is an interesting complement to the other tack that Starbucks is taking with some of its stores in “de-Starbucking” them. Stores across the country are being revamped to look like locally-owned coffeehouses, complete with local artwork, baked goods and live music. The stores go by the name of their street address i.e. “250 Chestnut” and have drawn mixed reviews from observers. While some accuse Starbucks of going “stealth” in trying to pretend to be a local small business, customers who have actually experienced the stores give them high marks for being much more community-oriented, fun and funky than their corporate brethren.

Turning a ship the size of Starbucks is a slow and daunting task, but we give management credit for both their initiative and imagination. This is a great example of service design in which they’re using both sides of their brains; focusing on both mechanics and aesthetics, to improve both the bottom-line and the customer experience. How can you do the same in your business?

We have posted four new videos today which cover a range of topics related to service design. Click here to check them out.

My wife goes to our local bank to make a deposit in the ATM. The rain has soaked the deposit envelopes stored outside. She walks into the branch to let someone know. She approaches the teller line, where there is a short line. A woman sitting at a nearby “Customer Service” desk asks brightly, “Hi, is there something I can help you with?”

“Yes, actually. I wanted to make a deposit at the ATM outside - but all the envelopes are wet from the rain.”

“Hmm. Okay, thank you! I’ll tell Bill to replace them at three o’clock…” She smiles and returns to her paperwork.

My wife looks at her watch. It is one o’clock. She replies, “Well, I think there might be some people who will want to make a deposit over the next two hours…”

The woman looks up with an expression of consternation. “Well, I’m not changing them!”

Without missing a beat, my wife replies, “OK, well if you give me some envelopes, I’ll just put them out there.”

Now the woman behind the desk is perplexed. “Uh no, wait. I, uh, can’t have you do that…..”

The woman puts down her pen, gets up from the desk and approaches my wife. “I have an idea - I’ll just take your deposit and process it myself! I’ll be right back…”

With that, the woman disappears behind the counter for nine minutes. The wet envelopes stayed in their holder that day, and surely the next time it rains they will get wet again.

Is this an example of poor customer service? A crashed user experience? A broken golden rule? Actually, it’s a multi-part service design challenge that points out the importance of understanding “service eco-systems.” From the culture of the bank to service protocols to customer touchpoints to the physical layout of the ATM and building - everything is inter-connected. Service design looks at the big picture to make things better not only for customers, but also for employees. Everybody wins.

Now if you’ll excuse me, I have a call to make…

Thanks to Mark Davis and his staff at Bentley University, in Waltham, MA. Their “Art & Science of Service” conference last week was a big success, with attendees from industry and academia who came from as far away as Germany, the Netherlands and Israel. There were lots of good contacts and networking opportunities. Our workshop, “Thinking Outside-In: Identifying New Service Revenue Opportunities” on Friday (see photo), generated some good interaction among the attendees. Thanks to all who contributed!

Some key takeaways from my conference notes:

• Out of IBM’s $103 billion USD of annual revenue, services now respresent more than half - $57 billion USD.
• IBM: Service science is more like biology (focused on classification) than physics (focused on mathematizing).
• “Service is value co-creation” - not just about money, but also about knowledge.
• At one hospital in the Boston area, a 1% turnover equals $250,000 USD. At one point, their turnover (prior to a new management team with a service design focus) was up around 20%.
• Why not show the wait times in an emergency room, similar to an airport terminal or deli counter?
• M2M acronym equals “machine to machine”
• Technology which enables M2M is exploding - both embedded devices and the back-end services. (Can security risks/opportunities be far behind?) This will have big impact on service design.
• What’s needed is a conference specifically focused on “service design in healthcare.” Lots of best practices and case studies, but it such a large sector that it needs its’ own vertical focus.

A book which had a big influence on our thinking back in the late 1990s was "The Innovator’s Dilemma" by Clayton M. Christensen, a Harvard professor who illustrated in very simple and elegant terms how disruptive innovation is brought about not by the folks with the big R&D budgets, but by smaller companies who "thought differently." Instead of adding feature upon feature, these innovator’s create products and services that are "good enough" at dramatically lower (and disruptive) price-points. Christensen and his colleagues have now set their sites on one of the biggest and toughest issues now facing the United States; healthcare.

In the recently published "The Innovator’s Prescription: A Disruptive Solution for Health Care" Christensen, along with co-authors Jerome H. Grossman M.D. and Jason Hwang M.D. lay out some very fundamental and easy-to-understand concepts as to why the current healthcare system is broken. You can read an extended excerpt of the book at the Forbes website, and we have chosen some of the "best of the best" ideas below.

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In order to understand how to "fix" hospitals, first it’s important to understand the value proposition of hospitals. Hospitals have become the workshops within which physicians could be trained and practice their intuitive craft, clinical laboratories where complex medical cases could be solved and unanticipated emergencies and complications could be resolved with as much certainty as possible.

This value proposition has been a great fit for solving poorly understood problems of the past, such as tuberculosis in the early 1900s, poliomyelitis in the 1950s and AIDS in the 1980s. When these diseases were first encountered, they had to be addressed in hospitals. However, in terms of the complexity of diagnosing and treating disease, for a century hospitals have been on a relentless upmarket march on the trajectory of sustaining innovation.
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Some excerpts from a recent article in The Economist…

"In recent years, consumers have become used to feasting on online freebies of all sorts: news, share quotes, music, e-mail and even speedy internet access. These days, however, dotcoms are not making news with yet more free offerings, but with lay-offs—and with announcements that they are to start charging for their services.” These words appeared in The Economist in April 2001 , but they’re just as applicable today.

The only reason it had not worked the first time around, it was generally agreed, was a shortage of broadband connections. The pursuit of eyeballs began again, and a series of new Internet stars emerged: MySpace, YouTube, Facebook and now Twitter. Each provided a free service in order to attract a large audience that would then—at some unspecified point in the future—attract large amounts of advertising revenue. It had worked for Google, after all. The free lunch was back.

Ultimately, though, every business needs revenues—and advertising, it transpires, is not going to provide enough. Free content and services were a beguiling idea. But the lesson of two Internet bubbles is that somebody somewhere is going to have to pick up the tab for lunch.

IncBizNet , the online site for Inc. Magazine, just posted a video clip from our service design workshop in New York City. Check it out below.

You can also find a set of photos from the workshop on Flickr.

Thanks again to the entire staff at IncBizNet for organizing a great event!