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…

A big part of our business is working with companies to understand the changes that technology – and specifically broadband – can bring to their business. There is probably no better example of this than the coming wave of “Connected TV” in which consumers will be able to connect their high speed broadband connection (via wire or wireless) directly to their HDTV set. The net result is the ability to watch any Internet video on a big, crisp screen from the comfort of your couch or favorite easy chair.

There is a lot of great content on the Web that will just never make it onto a cable channel. Whether it’s big-idea speakers from the TED conferences, or “how to” videos from Instructables, or independent films from Atom, I want to watch this long-form content on my TV, not my PC.

While this has huge impact for consumers, it will fundamentally change the relationship that HDTV manufacturers have with their customers. To date, the consumer’s “relationship” is with their cable provider. Historically, the TV manufacturer simply sold a big piece of glass, diodes and plastic and that was it. Less than 5 percent of consumers even sent in the warranty card.

But with the advent of connected-TV, the consumer electronics companies now find themselves in need of service design. Because now they have a very tight connection with the consumer and the revenues from services over the life span of the product will far exceed the revenues from the hardware. After all, there’s got to be some way of organizing and navigating the ever-growing mass of video content that is out there which in turn will lead to a wide variety of other value added service.

This is why we’re excited to be working with AnySource Media. They essentially empower the HDTV manufacturers with a four-pillar platform that brings Internet video to HDTV. These pillars include the embedded software that resides in the HDTV, pre-negotiated video content deals, an advertising platform that dynamicaly matches viewers and contextual ads, and a backend data center that ties this all together.

Connected TV is a “tipping point” technology. You’re already seeing the first few models come with many more to follow in 2010. I predict that by 2012, we’ll all be reminiscing about the “old days” when you couldn’t access your favorite show from the cloud, on demand.

This is not about watching more TV – this is about watching better TV, which means content you want, when you want it.

An interesting experiment in service design is unfolding this week as Starbucks and McDonalds aim their marketing cannons at each other. Starbucks is taking out full color, full page ads to tout their entire product/service/experience. The initial ad, launched today, covers quality (they only use the top 3% of available beans), Fair Trade (good karma), employee training, and health benefits to all employees who work over 20 hours. The last paragraph covers the user experience side: "Oh, and a little bit of the price of a cup of Starbucks coffee helps furnish the place with comfy chairs, good music, and the right atmosphere to dream, work and chat in. We all need places like that these days."

And in the other corner we have McDonalds, launching their "McCafe" brand on TV, radio, the Internet and in print. (Is it me, or do those billboards make the product look like plastic?) But watch out Starbucks: McDonalds is on a tear, particularly in this economy. They are a massive marketing machine, not to be trifled with. But the real questions is: Should Starbucks really be all that concerned with McDonalds? How many people do you know that are loyal to both those brands? Is Ralph Lauren concerned about Old Navy?
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Last week we were asked by an upcoming online retailer to re-think the service design of their online returns process for merchandise. This company sells clothing and have a very liberal returns policy, modeled after Zappos . They really want you to be happy with the fit, so they have no problem if you need to make an exchange for a different size or product. The problem is, the actual process of making the return is a hassle.

For most consumers, the traditional process breaks down into these key steps once they decide to make a return or exchange: Go to the website, look up your order, request a "return merchandise authorization" (RMA) which triggers the merchant’s systems to know that the merchandise is coming back and to prepare a return shipping label.

Now UPS or FedEx or USPS gets pulled into the loop. UPS does a pretty good job of interfacing into merchant systems, but they still have to open a new window in your browser to display the return shipping label, which you then have to print. If the merchant uses FedEx, they have to actually "pass you over" to FedEx to print your label and then FedEx has to "pass you back" to the vendor. It is a major case of "process interuptus." The whole customer experience falls apart.

For some systems, you can print the label once or twice or else have to start over. Don’t accidentally close the window before you print, or you have to go back to square one. Then you have to fold or cut the label and use multiple strips of packing tape to tape the new label over the old label. (Don’t have packing tape? Then run to the store!)

Some retailers include a return shipping label inside the box to begin with. Typically, this is part of an 8.5" x 11" crack-n-peel sticker sheet on which the original shipping label was printed, as well your bill of lading/invoice and the return label. But this is a waste of resources because that large label is expensive and unnecessary, and in most cases, people don’t actually need to do a return.

So, here’s a better way. We came up with a solution we call the "reversible shipping label" that UPS and FedEx could simply integrate into their business logic to make everything much simpler for their customers – and their customer’s customers. The fact is that no one (except the final recipient or their housemate/officemate) actually reads the text that is written on the labels. Every step of the package’s journey is controlled by the machine-readable bar code. The label is scanned numerous times, from the time it is picked up (from your home, office or a drop box) to every key checkpoint in the logistics network, right up until the moment the recipient signs for it. So…..

A consumer should be able to go online, tell the merchant they want to send the item back and then the merchant would trigger the "reversible shipping label" with UPS or FedEx. This way, all the customer would have to do is seal the box up as is, and have it picked up (or drop it off.) The original "ship-to" information on the original label is simply reversed. The original recipient is now the shipper and the original shipper is now the recipient.

The fact is that the logic is in the NETWORK, not the physical label. So why force the customer to go through all the messy hassle of dealing with printers, paper, tape, scissors, etc.? Let the machines do what machines do well, and let people get back to shopping online and doing more productive things with their time.

(That is, unless of course, the merchant wants to make returns a hassle. But that’s a different topic for another service design blog entry…)

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!

We were profiled today by The Phoenix , a local newspaper and I think it was very well written on our approach to service design. Here’s the article…

New Start-up Focuses on ‘Service Design’

Wednesday, March 18, 2009 8:39 AM EDT

By G.E. Lawrence

MALVERN — For Charlestown resident Bob Cooper and Frontier Service Design LLC, the most interesting part of finding ways to add to a company’s bottom line is its intellectual challenge.

"We want to work with clients who know what they know, and more importantly, know what they don’t know," Cooper says. Clients who are "eager to find a knowledgeable and experienced partner who will help them know what they don’t know."

That’s no Zen koan: it’s a principle of a business model emerging out of Cooper’s over two decades working with corporate clients, and discovering along the way undiscovered value in what they do — leading to the development of new and consistent revenue streams.

"The most fun and profitable relationships for everyone," Cooper says, are those "where we really get inside the business, understand the culture and the people, and really make a difference through service design."

"Service design?" Yes, the focus is on "service," in a national economy in which 70 percent of gross domestic product is in services, not products — but on the services surrounding manufacture, as well.

His new company, Cooper says, takes "an approach to help companies design, prototype and launch" service innovations, by getting to know a company’s processes thoroughly, and applying good ideas and best practices across industries, developing in the end "new and recurring revenue streams.

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During the dot com meltdown and the resulting economic "correction," companies cut everything they could think of in order to stay afloat. Many were over-leveraged and had to stop all forward-thinking momentum just to keep the lights on.

Sound familiar?

There were a very few companies, however, that took every dollar they could get their hands on to create in the midst of the downturn. They hired the innovative creatives and put them to work. The goal was to come roaring out of the recession with some new service or product (or both) that would take some existing something and make it new again.

Case in point?

Apple’s iPod and iTunes.

Love it. Hate it. It doesn’t matter. That product and the service that accompanied it changed everything.

The iPod took an existing idea, the "Walkman " and more modern "Discman " and made it smaller, gave it better battery life, and created rewritable capacity that was far larger than a CD or cassette tape.

iTunes tapped the vast but complicated world of online illegal music sharing, gave it an intuitive interface, charged a reasonable amount of money, and set it free in the wild. (DRM is another issue entirely that crossed the minds of  few at the time.)

As the iPod made the Discman a relic of the past, iTunes made illicit music sharing the realm of only the most die hard of pirates.

This is service design. Seek out that sweet spot where product and service meet customer reality. Then innovate. It’ll blow things wide open.

Last week during my service design workshop for Inc. Magazine, I cited the study from Bain Consulting in which 80% of executives from large public corporations believed that they were providing "outstanding customer experiences" to consumers. I asked the group of privately-held company CEOs to guess what percentage of customers actually agreed that statement. People called out "30%," "20%," "15%!" It was like a reverse auction. And yet nobody even came close to the dismal truth that only 8% of customers agreed that they had an outstanding customer experience. You could actually hear a collective gasp in the room when I told them that the number was 8% and that the execs had missed it not by a factor of two or three but by a factor of 10!

I’ve been thinking a lot about this disconnect within large corporations. Why does it exist? I have a couple theories, and the first revolves around the old saying, "familiarity breeds contempt." It’s tough to nail down who first said that, either Aesop in a fable or St. Augustine ("vulgare proverbium est , quod nimia familiaritas parit contemptum.") And while this saying is most often associated with individuals and inter-personal relationships, I think it’s true for companies and their customers. In traditional marketing there is a mad rush to get new customers, as opposed to really understanding the customers you have, which in turn, would help you attract more customers. (more…)