A breakthrough in the service industry was the development of the concept of the service-profit chain by Earl Sasser at Harvard. Implicitly the whole concept was about improving service levels through raised interconnectivity and personalisation for clients. If we examine a whole host of innovations in recent times, whether it’s checking in for your next Southwest Airlines flight or accessing your bank account, from Facebook to crowdsourcing, the unstated objective is that increased connectivity is good for transparency of markets, providing better service to clients and eventually increasing profitability.

Nothing could be further from the truth if you look carefully at the service strategies of many very profitable companies. Should we say successful, because they would be proud of the record when presenting to shareholders – but facing their customers they often use the sharpest of practices to avoid customer contact as well as avoiding fulfilling their contractual commitments. Take the airline industry; in a recent WSJ article it was reported that complaints to the DOT (Department of Transportation in the U.S.) had increased by 30% between 2009 and 2010 – many of the complaints are about airlines determinedly avoiding contact with passengers when they have problems or complaints.[1]

Low cost airlines are the main culprits – many of them refuse to provide any means of applying for a reimbursement on their websites even though required by law. If you fly with Ryanair you know the high service levels for purchasing, checking and upgrading your ticket. Most airlines could learn something from Ryanair in this area. However when the flight is cancelled the first stance of the airline is that you will not get your money back let alone have a flight rebooked. The second stance is reluctantly sending back your original fare. All this is done by snail mail! Forget the service you got on the other side of the fence.

Telecommunications companies in Europe are no better – in most surveys their customers would agree on one thing: they feel ripped off and they can’t get an intelligent response out of these companies. While it is easy to sign on with these companies they establish their call centres to provide disastrous service, with the accounts department invariably uncontactable and the level of frustration of customers leading them to churn their business through different companies. The simplest question – “have you phoned your customer call service” – is met with blank stares. We actually had an executive of a large telecommunications company say why on earth would he want to do that when he could sort out his problems directly!

The observation of another executive from a different company was that it was cheaper to pay fines to the European Union than to reimburse their customers. So much for the service cycle. What we’re seeing in service innovation is the service-profit chain being balanced by its inversion, dodging the customer.

When developing an innovation strategy it is important to seek clarity in terms of what levels of transparency and service should be achieved. Having perfect transparency and service can be a costly business. Losing customers might be more cost effective in the long run.

[1] Scott McCartney, “More fliers gripe about airline service,” Wall Street Journal, October 8-10, 2010, p.31.

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