As the service element of a business grows, product companies struggle to make these services more productive. Most product-based services depend on call center agents who answer questions from customers or on field service agents who maintain and repair equipment at customer sites.¹ Achieving the desired productivity gains is challenging for several reasons.

First, executives tend to rely on improvement approaches that have worked in product businesses—for example, Six Sigma or lean. These models fail in services, not because the theory doesn’t apply—who could argue with reducing waste?—but because they are often applied to only part of a service process (rather than across the complete chain of events that make up the service) or because they don’t account for the inherent variability in services. Every service call differs at least slightly from the one before, bringing into play a particular set of personalities, problems, and environments. As a result, defining standard processes and setting benchmarks can seem problematic. It’s even harder to standardize the behavior of employees, since each of them brings different capabilities and motivations to the task.

A second reason for the difficulty of improving performance in services is that executives often think they must deliver the...