Services and consultancies

Figure 7.5 describes a limited area of business known as the service industry (this would also include all manner of consultancies and advisory services). The prime focus of these service businesses would be to:

1) Establish an expertise in a chosen area of specialty

2) Maintain this expertise in the face of competition and continuous technological change

3) Build a reputation for competence, reliability and value

4) Make sure there is sufficient continuity of work to maintain the work force

It might seem that such businesses would not be subject to undue risk because the work projects and goals would be specified by a client and the contracts would be such that these service providers would get paid whatever the success or otherwise of the client's business venture.

In the Industrial Age, this might have been the state of affairs, but, in the rapidly changing world of the Information Age, any business based upon a service is basically unstable for the following reasons:

1) It is a gamble as to whether or not the area of expertise chosen for a service business remains fashionable for any reasonably length of time.

2) Maintaining expertise in the light of continuous technological change is time consuming and expensive and can eat away at profitability.

3) Unrealistic expectations and a lack of technical knowledge by clients can easily cause clients to be lost and reputations ruined.

4) Fast changing technological trends can quickly cause skill sets to become redundant. Staff who do have currently fashionable skill sets tend to be highly mobile because of high demand for their expertise. These factors make it extremely difficult for companies with skilled employees to maintain a constant level of reliability and competence, resulting in reputations having short shelf lives.

5) Because of a lack of technical knowledge it is extremely difficult for a client to know whether or not they are getting good value for a highly technical service. This makes it very difficult for truly superior service companies to compete against inferior services that put special emphasis on sales and marketing. This does not put them out of business but often sees them at the poorly paid bottom of a food chain (see note below)

Such instability does not suit either investors or large companies so the bulk of this service work is done through individual freelancers, small companies or associations. They can be more flexible, able to change direction easily. They can build and develop their knowledge and expertise in specific niche areas, gradually establish a reputation and a portfolio of regular clients. This is usually sufficient to ensure a reasonably good income: enough to amply reward them for their efforts

Note: The technological food chain

Most technical specialists are not sales people and resent having to use their valuable time visiting and talking to clients who seldom appreciate the depth of their technical knowledge. Sales people on the other hand have no time to spend learning the technicalities because they spend most of their time looking after clients and chasing around looking for new business.

This situation creates symbiotic relationships and hierarchies of dependencies – known as the food chain – which although essential is often resented as is illustrated by the post to a table in the cafe by Stephen Roberts:

...everyone who works in the new media industry in London knows that there exists a food chain. A big client goes to its PR department with a requirement for a web site. They contact an advertising agency who will brief a specialist web agency. Often This large agency will then subcontract to one of the small website companies around town. Below this chain is a huge raft of bottom feeding freelancers, picked up on an ad hoc job by job basis.

I assure you this is true and sometimes the chain is even longer. It's a sort of evil version of what we were talking about and it's honestly not a fulfilling way of working (I've often been told to lie to a client as to where I was calling from with a project related inquiry).

Stephen Roberts