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When we look at service businesses that have grown and prospered—companies like Wal-Mart in retail, Commerce Bank in banking, and the Cleveland Clinic in health care—it is their effective integration of the elements that stands out more than the cleverness of any element in isolation.

This article outlines an approach for crafting a profitable service business based on these four critical elements (collectively called the “service model”).

Think about how you’ll pay for the increased cost of the excellence you’re seeking to provide through your service offering.

Possibilities include: Commerce Bank competes on extended hours and friendly service, not on low price or product variety.

Many of the management tools and techniques used in service businesses were designed to tackle the challenges of product companies.

Although they are valuable to service managers, they aren’t sufficient for success.

Any of these four elements—the offering or its funding mechanism, the employee management system or the customer management system—can be the undoing of a service business.

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After years of extensive research and analysis, she offers an approach for crafting a profitable service business based on four critical elements: the design of the offering, employee management, customer management, and the funding mechanism.Above all, they learn that to build a great service business, managers must get the core elements of service design pulling together or else risk pulling the business apart.The challenge of service-business management begins with design.But delivering a service entails something else as well: the management of customers, who are not simply consumers of the service but can also be integral to its production.And because customers’ involvement as producers can wreak havoc on costs, service companies must also develop creative ways to fund their distinctive advantages.Just like a product that’s going to market, a service needs to be compellingly designed, and management must field a workforce capable of producing it at an attractive price.Additionally, however, service firms must manage their customers, who do not simply use the service but also can be integral to its production: Because customers’ involvement as producers can wreak havoc on costs, companies must also develop creative ways to fund their distinctive offerings, by providing a self-service alternative, for example, or by offsetting expenses with operational savings.It knows it doesn’t need straight-A students to master its limited product set, so it hires for attitude and trains for service.For instance, it uses simple recruiting criteria, such as “Does this person smile in a resting state?Shared services within a firm (functions such as HR and finance) can help, since they will enable it to generate economies of scale and experience across models.All successful firms must design a compelling offering and manage the workforce to deliver it at an attractive price.

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