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The Transformation Of Business Services

In commercial services, more traditional business models are under pressure and a high level of innovation is required to keep demonstrating added value. What to do?

Many commercial service providers owe their existence to friction between demand and supply. They resolve this friction by offering knowledge and skills. That’s the value they add. Take, for example, commercial service providers in the financial sector, such as banks. In the past, if I wanted to take out a mortgage, I went to my bank, had one or two meetings to understand my options and then I’d take out my mortgage by signing the contract in a third meeting. I might have done this at another bank too, but that was far less likely. 

Today, I go to a mortgage comparison site, type in my details and let the website determine which three providers I want to give me automated quotes. I choose the best option for me and I might even be able to take out the mortgage online. In short, smart technology means I have no further need of that man in a suit. 

Business models in transformation

In commercial services, more traditional business models are under pressure and a high level of innovation is required to keep demonstrating added value. After a difficult start, many are coping well with this – particularly since market developments are now adding to the pressure. And should it not go so well, the new service providers with their internet-driven business model are waiting in the wings. In short: the overall commercial services market is growing but, now more than ever, it is crucial to respond to new opportunities facilitated by internet technology. And these opportunities represent huge potential.

Customer-centricity as starting point

Many commercial service providers built their business in the past and they’re more or less still exploiting it. This business is mostly based on the knowledge and expertise of their employees, perhaps also encapsulated in processes and procedures. They have a strong product/service focus, also known as product-centricity. 

Many see and feel that things need to change and go on to launch a customer-centricity project. This kind of initiative is helpful but effectively little changes. It fails to go beyond some nicely articulated core values that focus on the customer and some updated IT tooling at the company’s periphery. This is not usually the transition that the company needs. You need to go deeper into all echelons of your company – but you must really want to do this and it won’t be easy. Current business objectives, processes and people will need to make way for new vistas and space must be allowed for innovative discovery. Always with the customer as the starting point.

Innovation and IT targeting existing business. Where’s tomorrow’s entrepreneurship?

Research carried out by, among others, PWC and Berenschot shows clearly that innovation and digitalisation go hand in hand in most boardrooms. These agenda items are right at the top of the wish list. However, it is also noticeable that such innovation and digitalisation are primarily focused on the existing business. They’re basically tinkering with what they were already doing. Not a problem in itself, but in essence you’re concentrating on efficiency and improving the effectiveness of current operations. In business service provision, you need to discuss real innovation and, ideally, disruption. This doesn’t happen often enough. 

This is of course partly down to the nature of business services. This is strongly knowledge-driven, so builds on existing profitable business practices that are disseminated from one knowledge professional to the next. Why change? 

If you watch carefully and listen to the market and your customers, there’s plenty of scope for new initiatives. But you do need to draw on your entrepreneurial qualities and really want to achieve something. That’s when you will make the difference and add value for years to come. For your customers and for your own staff members. Pretty much your most important assets.

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Picture of Emiel Kanters
Emiel Kanters

Managing Director & Partner