Service Profit Chain or Service Design?

Service Profit Chain and Service Design

This is a question I get quite often. And the short answer is that it’s not an either-or, it is a both-and.

The Service Profit Chain is, in my view, a strategic approach. What kind of an organisation would we like to be? It is very much about why we do what we do.

Service Design, on the other hand, is all about how we actually do it. It is the step by step approach to looking at all our interactions with the customer and making sure that they actually contribute to generating values for this customer persona.

“The activity of planning and organising people, infrastructure, communication and material components of a service in order to improve its quality and the interaction between service provider and customers”
– Service Design Network

In simpler terms, you could say that on the one hand, we need to create an organisation that is willing and able to create fantastic customer experiences. That is what happens when we start melting the principles of the Service Profit Chain.

With Service Design, we then make sure that the service that we are providing is a contribution in the best possible way to create values of the customer.

In practical terms, that means that we take the value equation from the Service Profit Chain frameworks and use that as a key tool to understand what a given customer persona actually wants. Value is deeply subjective and can only be defined and understood from the perspective of the customer.

Once we have that clear understanding of what certain customer personas are looking for, AND how each persona profile is slightly different from other persona profiles, then we can work through our customer journey, and touch point by touch point develop the best possible experience.

In that way, the Service Profit Chain and Service Design complement each other beautifully.

This blog post is part of a series of answers to frequent questions that I get around the concept of the Service Profit Chain. In future’s posts, we will continue to explore other key points. If you would like the full concept served up in one go, you will find Mike’s book “Best! No need to be cheap if…HERE.

Why the Service Profit Chain concept is more important now than ever before?

Service Business

Check out Google trends, the interest in customer service and customer experience is steadily rising year by year and has been for the past 5 years.


Because we live in an age of abundance – this is one of my key points when I give live presentations. By abundance I mean that there is too much of everything. There are more hotel rooms, restaurant seats, cars for hire or consultants etc. than the market actually needs. So we are all trying to survive in a hyper-competitive environment.

In a hyper-competitive environment, it is not enough to try and compete on product specifications. Because within a given price bracket, the specifications for most product are more or less identical. So in order to differentiate, we need to look at the experience and that typically means that we add some service components.

On top of that, we are rapidly moving away from products and into services (Just think cars, in a few years when cars become self driving, they will no longer be products but we will see them as a service). So society is moving to service dominant logic. And when products are turned into services, the focus shifts, it is not about the product spec but the customer need.

If we want to compete on experience and service, we need to focus on the interaction between the frontline staff and the guest/customer – what we also call the touch points. That is the critical interface – that interaction can lift what is otherwise just a bland run of the mill experience into a memorable experience. And when that happens, we create loyalty. High customer loyalty is the key profits a growth.

So some companies launch major initiatives around creating loyalty. They see that as their main objective.

But that is only because they are not paying attention to the principles of the Service Profit Chain – in a sense they have got the wrong end of the stick.

There is no shortcut to the profits and growth. You need to take the long haul and that starts with creating an inspiring and engaging workplace, and that is what the concept of the Service Profit Chain can help you do – and that is why understanding this key framework is the best way to survive in a hyper competitive environment.

Check our my course The Service Profit Chain explained!


This blog post is part of a series of answers to frequent questions that I get around the concept of the Service Profit Chain. In future post, we will continue to explore other key points. If you would like the full concept served up in one go, you will find Mike’s book “Best! No need to be cheap if…HERE.

What is your declaration of incompetence?


Learning and development is a key component in our overall wellbeing.

In order for you to learn – there needs to be a gap: A gap between your desired results/performance and your current ability. This was the topic of last week’s post where you can find a more detailed explanation.

You may of course not be getting the results you hoped for despite the fact that you have the ability. I.e. you know what to do but you are not doing it. That is not a learning challenge but a motivational challenge – the cure for that could be a bit of coaching but that is topic for another day.

We can look at our roles from two perspectives. There is a management perspective and a leadership perspective. Identifying the gap from a management perspective is often quite easy. In our roles as managers, there are typically some quite explicit expectations that have measurable metrics attached to them.

But the other part of our job – the leadership aspect does not come with the same set of quantifiable metrics. So how can we identify the gaps here?

One way of doing it is to use the DAC framework developed by Center for Creative Leadership. I wrote about that in a previous post that you will find here.

So to what extent do you feel that there is direction, alignment and commitment on the team that you are leading?

Take look at the matrix below and ask you self that hard questions on each of these. Where is my team and where would I like them to be?

Happening Not Happening
Direction – There is a clear vision of a desired future that everyone buys into.
– Team members are individually clear on what the team is trying to achieve as a whole.
– No agreement on priorities
– Team members feel they are bingo pulled in multiple directions.
– There is lots of activity but not much progress.
Alignment – Roles and goals are clear individually.
– There is a clear understanding of how each and everyone contributes to the larger picture.
– There is a sense that this is a well coordinated and synchronised effort.
– Deadlines are missed. Rework required and lots of errors resulting in double work.
– People feel disconnected from each other.
– Internal competition and blame games are the norm.
Commitment – Team members go the extra mile.
– There is a sense of mutual understating and trust.
– There are visibly high levels of engagement.
– Only the easy things get done.
– Team members are questioning what is in it for them.
– Individuals avoid taking ownership and responsibility.

Is there a gap?

So back to the learning – for learning to happen you must declare your incompetence. “I would like to achieve xyz but actually I don’t quite know how to get there.”

How does that feel? Scary, intriguing, motivating? Whatever you are feeling, what is important is that you are slightly out of your comfort zone – because that is where learning, growth and development actually take place. So if it feels a bit uncomfortable – great, you are on track.
There is a great learning opportunity.


If you have the curiosity to take a deeper dive into the subject of how we produce engagement on our teams, you are welcome to download my ebook Understanding Engagement.

Enter your email below and download the ebook now!

In this brief e-book, we will look at how the lack of engagement is to a large extent a function of leadership. And that if we really want to change the engagement levels on our teams, we will need to make radical shift in how we understand the world of work. The shift is all about moving from a transactional mindset to a transformational mindset. We will look into what that means, how it can help you as a manager and why it is so important.

Yes ! Send me the Ebook



Are you the chief employee experience officer?


Focusing on the customer experience is the key to high customer loyalty – it’s well established.

That is also why around 70% of medium to large UK companies have a customer experience manager at the level of VP or equivalent. The current buzz-tool for developing these customer experiences is ‘service design thinking’.

So far so good.

But if you’re familiar with the service profit chain, you also know that the key to an exceptional customer experience starts somewhere else. We need to create what we call ‘internal quality’ – more popularly referred to as ‘a dream team cycle’.

So what would happen if we were to turn all this service design thinking on its head and focus more on the employee experience? When did we last sit down to analyse the employee journey as it unfolds throughout the day?

Do we know what the critical touch points are? Have we done some emotional mapping that could help us understand what the possible frustrations are during a day?

What are the learning opportunities? Does this job have varying challenges, or is it just the same thing day in, day out?

This idea came to me as I read Global Human Capital Trends 2016, published by Deloitte University Press. According to this latest survey, 92% of executives listed organisational design as very important and something they will be focusing on this year.

So designing our service organisations from the employee perspective should receive the same kind of attention and resources as we use when looking at the customer experience. Yes?

This leaves the question of who the chief employee experience officer is going to be in your organisation. Will they be part of HR, or will your organisation create a totally separate role?

I would love to hear your views on this, so please feel free to reply to this mail.


Service is a Contact Sport

Appels - one bad
And that needs to be reflected in the way you manage who gets to play on your team.

Step number one, when we are trying to create a service dream team, is having the right people on the bus. There are two parts to this: recruiting and developing.
Before we explore those two aspects further, let’s just take a look at why this is important. The name of the game, when we are running our service company using the Service Profit Chain framework, is employee loyalty.
In this context, loyalty has two dimensions: retention and attitude.
So, if we want to keep our best people and ensure that they continue to have that world-class, can-do-attitude, we need to be careful not to take away their job satisfaction.

How to Insult Your Best People

Ask them to work alongside an idiot!
Nothing demotivates a great service provider as much as having to work with a colleague who is not performing or, even worse, is blatantly annoying our clients. And if you – their manager – are not seen as doing something about what is obvious to everyone, one of two things will happen.

1) They will leave the team and find a place to work where they are sure to work with other star performers. (This is one of the secrets to Ritz-Carlton’s success, in my opinion – the best service people want to work there. Why – because they know they are going to work with the best in the industry.)
2) They will reduce their efforts so that they match the underperforming colleague.
In either case, your customer will be at the receiving end of a lousy service experience.
So, when we look at the best companies in a given service category, we always see that they are picky about who they hire. They do not adhere to the warm-body principle, “As long as they have a pulse, we’ll take ‘em,” to the extent that they prefer not hiring to hiring someone they are not 100% sure fits. And ‘fit,’ in this instance, is about values and attitude – not about skills.

Deal with the Bad Apples

Secondly, great managers do not put up with bad performance. If someone is not performing, they are coached. And if they are not seen to be making an effort to improve, they will need to go.
Great service organizations play to win – consequently, they have no room for players who are not performing – it’s that simple.

Seven Steps to a Dream Team

There are 7 more steps to creating a dream team – I have outlined them in a handy Checklist that you are welcome to download here.

Building a great service business begins with understanding the Service Profit Chain framework. In my view, that is the foundation. Check out my free introduction here

A Managers Guide to a Dream Team


The Service Profit Chain is a well-documented concept.

Since the original research was published in 1989, hundreds of articles have promoted the original findings which essentially boil down to the fact that happy employees create happy customers – and the happier the customers you have, the more money you make –
Yes, I know that was a very simplified version.

What not so many people talk about, or even document, is that this concept of ‘happy employees’ is not so much a question of employee satisfaction but, to a much higher degree, a question of employee engagement.
So, what are the steps to producing a high level of engagement on a service team?
According to the original research in The Service Profit Chain, there 8 steps in a self-reinforcing cycle called the dream team cycle.
Look closely and you will recognize that this is exactly what the best high profile service companies do:

The Right Team
Careful selection of new recruits. Hire for attitude. Train for skills.Coach for performance and that includes dealing with the bad apples.
Continuous Improvement
Best in class training and development at all levels in the organization. Continuous improvement is considered one of the great benefits of the job. “In this job, I grow”…
Great Support Systems
Service is not just something the frontline does for our customers. Service is our culture. Employees and managers who do not have customer contact service the employees that do. (Our IT department is not the IT-Police – it is an internal service department that supports the frontline in getting the job done.)
The best service employees take pride in solving the problem on the spot. So the freedom to act is hugely motivating. Southwest Airlines famously tells its employees, ”You may do anything you are not uncomfortable doing to solve a passengers problem.”
Clear Expectations
In the same way that anyone who has made it to a great sports team knows what is expected of them, employees in the best service organizations also know what is expected of them. It is part of their motivation to be part of a team that is not afraid to set the bar high.
Appropriate Rewards and Recognition
Focusing on what works, celebrating success, and acknowledging each others contributions makes work meaningful.
High Levels of Satisfaction and Engagement
As a result of Steps 1-6, we generate not just higher levels of satisfaction, but also real engagement – Service work becomes fun and meaningful.

Employees Recommend New Employees
When we need to recruit new team members, our best employees recommend friends and previous colleagues from other organizations because these are the people they would like to work with. Gradually we become the preferred employer in our region – which means we get the pick of the crop.

And that takes us back to Step 1 – The Right Team.
Done consistently this 8-step cycle become a self-reinforcing process that propels our service delivery capacity to higher and higher levels – and we all know what that does for our customer satisfaction and loyalty.


Building a great service business begins with understanding the Service Profit Chain framework. In my view, that is the foundation. Check out my free introduction here