Business services are activities that help companies but do not result in a physical commodity. Those activities include logistics, warehousing, and transportation and shipping. They can also include data processing, information technology, human resources, and other miscellaneous support functions. Companies hire these service providers to improve efficiency, production, safety, and cost.

Unlike product businesses, where companies focus on improving productivity, business services companies work to improve customer service. Increasingly, they are relying on outsourcing to achieve this goal. In addition to reducing costs, this approach allows them to quickly adapt to changing market conditions. This is a huge advantage when it comes to business services in a world that is constantly changing and demanding.

There are four critical elements of successful business services: the customer experience, the service provider, the service model, and the service design. This article outlines an approach for crafting profitable service businesses based on these four areas. Developed as part of a core teaching module at Harvard Business School, this framework helps students understand the differences between service businesses and product businesses, as well as the implications for management practice.

In the three-sector economic theory, business services are considered tertiary, compared to primary and secondary sectors that produce tangible goods. Nonetheless, business services have grown into one of the largest segments of the U.S. economy, and the industry continues to grow at a rapid rate. The growth of the sector has been driven by technological advancements and a growing need for improved supply chain management and logistics. The industry is also aided by a globalization trend that is creating new opportunities for companies to outsource their business services to countries with lower labor costs.

The majority of business services fall under the categories of financial and non-financial services. The majority of the financial services are provided by banking and investment firms, while non-financial business services encompass a variety of activities such as waste removal, information technology support, and even the maintenance of office space. The most common type of non-financial business services is software services. These are used to improve features, upgrade security, and provide anti-virus protection for a company’s or individual’s technological devices.

Despite the many advantages of business services, there are challenges that come with running a service-based company. One major challenge is the need to develop a solid strategy that will make the business model profitable and sustainable. Another issue is the need to have a strong leadership that will balance the competitive autonomy of line managers in service models with the shared value of the service organization as a whole. Without a strong leadership, revenue-generating line managers will often overrule shared services managers, which can undermine the success of the service organization. Additionally, it is important to have the right people in the right positions, as this will lead to a high quality of service. To do this, managers need to focus on recruiting and training the right employees, as well as develop a culture of innovation in their organizations.