Creating Growth With Services

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Faced with saturation of their core product markets, companies in search of growth are increasingly turning to services. A few companies have enjoyed success with this approach; others have not been so fortunate. The authors explain how managers can improve the odds of success by taking a systematic approach to creating services-led growth.

Companies must begin by redefining their markets in terms of customer activities and customer outcomes instead of products and services. Customers seek particular outcomes, and they engage in activities to achieve them. These activities can be mapped along a customer-activity chain, which is the foundation for exploring services-led growth opportunities. Analogous to product-centric growth strategies such as product-line extension, product-line filling and brand extensions, customer-activity chains can be extended, filled, expanded or reconfigured with new services. The authors have developed a framework — the service-opportunity matrix — to help managers structure the investigation of new opportunities. For each quadrant of the matrix, they provide a set of questions to help companies determine whether a particular approach would work for them. In addition, they have devised another matrix, on risk mitigation, to help managers assess the pitfalls and risks that these opportunities represent.

Mohanbir Sawhney is the McCormick Tribune Foundation Professor of Technology at Northwestern University’s Kellogg School of Management in Evanston, Illinois. Sridhar Balasubramanian is an assistant professor at the University of North Carolina’s Kenan-Flagler Business School in Chapel Hill. Vish V. Krishnan is an associate professor at the University of Texas’ McCombs School of Business in Austin. They can be reached at mohans@kellogg.northwestern.edu, balasubs@bschool.unc.edu and Krishnan@mail.utexas.edu.

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