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Distribution Channels > 12 - How the business model of the final-tier trade channel players works > Flashcards

12 - How the business model of the final-tier trade channel players works Flashcards

1
Q

What comprises the business model of a final-tier trade channel player?

A

A mix of product resale and service provision.

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2
Q

How does the proportion of services change across different partner roles?

A

Typically increases as you move from left to right of the partner types.

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3
Q

What is a general trend across industries as they mature regarding final-tier trade channel players?

A

They grow the proportion of their sales coming from services.

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4
Q

Why do final-tier players need to compete harder for growth as markets mature?

A

Service provision provides the basis for increased differentiation.

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5
Q

What is one benefit of product resale wrapped up inside a service proposition?

A

Can generate higher margins than just reselling a product without service.

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6
Q

What is a unique characteristic of service businesses compared to product businesses?

A

Services come from people, either directly or indirectly.

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7
Q

What are the special challenges facing those managing service businesses?

A

Volume sensitivity, fixed capacity, project/contract-based value delivery, people-based value delivery.

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8
Q

Fill in the blank: Time cannot be inventoried; it is like the seats on a plane or rooms in a hotel. Once the plane has taken off, or the night has passed, no customer will pay for it! _______ must be sold for the period in which it is available.

A

[Capacity]

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9
Q

What happens to revenue when the volume of sales generated is low in a service business?

A

Margins are highly sensitive to changes, leading to volatile gross and net margins.

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10
Q

How does Putney Plumbers Co manage its capacity and sales pipeline?

A

By planning to use time as productively as possible and sending staff on training when idle.

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11
Q

What is a reason why preventative maintenance and annual service contracts are beneficial for service providers?

A

They provide revenue certainty.

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12
Q

What does it mean for booked revenue to ‘move’ in service businesses?

A

It means revenue is rescheduled from one week or month to another due to various reasons.

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13
Q

True or False: People prefer to be paid on a monthly basis as employees.

A

True.

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14
Q

What is the impact of delayed work on a service provider’s capacity?

A

It can lead to overwhelmed resources in future weeks or months.

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15
Q

What is the significance of having visibility of the revenue pipeline for service providers?

A

It helps in planning and managing future order books and maximizing margins.

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16
Q

What is the primary cost structure concern for service businesses?

A

High fixed costs related to salaries and overheads.

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17
Q

Fill in the blank: The profitability of the service is directly related to the volume of _______.

A

[Sales generated]

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18
Q

What is a potential consequence of misreading growth signals in a service business?

A

Piling up tough months ahead with underused staff.

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19
Q

What does the management of service businesses need to balance?

A

Short-term revenue and profitability with long-term customer relationships.

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20
Q

What is an important aspect of managing the sales pipeline in service businesses?

A

Building up a future order book.

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21
Q

What should service providers do when they experience slippages in scheduled work?

A

Plan for likely slippages and juggle conflicting resource demands.

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22
Q

What kind of analysis is essential for service providers to manage their businesses effectively?

A

Understanding different velocities of revenue moving through the pipeline.

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23
Q

What do providers build to manage revenue and work slippage?

A

An air-traffic controller’s picture of different velocities of revenue moving through the pipeline and the likelihood of work slippage

This analogy helps visualize the management of resources and timelines in service provision.

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24
Q

What is the key to success for service providers regarding resource management?

A

To have resources fully utilized for as much of the trading period as possible, maximizing income generated from each person

This involves balancing workloads and preventing burnout.

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25
What are common challenges on the supply side for service providers?
* Sickness and absence of key staff * Staff turnover * Overruns on current projects * Subcontractors failing to honor commitments * Inexperienced or over-qualified staff ## Footnote Each of these factors can lead to capacity and availability issues.
26
What is a critical consideration when managing capacity utilization?
The trade-off between optimum efficiency for high margins and optimum quality for long-term customer satisfaction ## Footnote Balancing these elements is crucial for sustainable business success.
27
What does capacity and utilization planning require?
A good understanding of the different technical skills and experience of each staff member and the requirements of each customer ## Footnote This understanding helps in effective resource allocation.
28
What is the role of management in scheduling overtime?
To set guidelines and limits on how much overtime can be scheduled ## Footnote This helps prevent burnout and maintain quality.
29
What is the significance of understanding customer requirements in service delivery?
It helps in defining the scope of work and anticipating risks, which is essential for pricing decisions ## Footnote A clear understanding can lead to better contract negotiations.
30
Fill in the blank: The unit of delivery for most service providers is usually a _______.
[project or contract]
31
What factors influence the target margin built into the price of services?
* Market price for similar contracts * Customer account significance * New service offering potential * Utilization of available capacity * Cost of required resources * Service provider’s attitude to risk * Selling skills ## Footnote Each of these factors can significantly impact profitability.
32
What is the challenge of adding to the headcount in a service provider?
It may take time to recruit and induct a new resource, but once added, there are barriers to removal if demand does not materialize ## Footnote This can lead to high employment costs without corresponding revenue.
33
What is essential for fulfilling a service provider's promise post-contract?
Project management skills, risk management skills, and people management skills ## Footnote Effective execution of the project is as crucial as the initial agreement.
34
True or False: Service providers should prioritize short-term profitability over long-term customer relationships.
False ## Footnote Sustainable relationships are vital for future business opportunities.
35
What does effective selling skills involve for service providers?
Building the expectation of value that the customer will derive from the contract or project ## Footnote Insightful questioning techniques can uncover value drivers in the customer's business.
36
What should service providers consider when planning for the next one to two years?
* Services and offerings needed * Skills and resources required * Recruitment and training lead-times * Market changes ## Footnote These considerations are essential for strategic capacity planning.
37
Fill in the blank: Service providers need to maintain a database of the _______ of each of their people.
[skills]
38
What is the impact of sustained periods of overtime on employees?
Quality issues, burnout, and high staff turnover ## Footnote It’s important to manage workloads to maintain staff well-being.
39
What is the bespoke value proposition in service delivery?
The bespoke value proposition is how the service provider defines the unique value of each assignment for individual customers.
40
What are the key skills required for effective value delivery?
* Project management skills * Risk management skills * People management skills
41
What can derail well-managed projects?
Adverse events outside the service provider’s control, such as: * Sudden incapacitation of critical personnel * Loss of key components in transit * Incompetence of other providers in multi-provider projects
42
What is recoverability in the context of service delivery?
Recoverability is the concept of recovering the full price for the value actually delivered by the service provider.
43
Fill in the blank: Full recovery is when the service provider receives _______ of its target revenue for the contract.
100 per cent
44
What are some reasons service providers might concede recoverability?
* To avoid annoying the customer with constant demands for minor work * To improve chances of winning future work from the customer * To maintain their image or reputation with the customer
45
What causes poor recoverability for service providers?
Poor recoverability can result from: * Poor-quality work requiring redoing * Learning curve delays * Staff scheduling inefficiencies * Use of subcontractors * Over-optimistic estimates * Supplier performance issues
46
True or False: Service providers always recover the full costs of changes initiated by the customer.
False
47
What are conflicting expectations among stakeholders in service delivery?
Expectations include: * People expect variety and personal development * Customers expect highly experienced staff * Service providers expect efficient resource allocation
48
What does effective people management involve?
Effective people management requires: * Attention to work experience * Work/life balance * Morale * Training and development * Career progression
49
How does high staff turnover affect service delivery?
High staff turnover negatively impacts customer service, team continuity, and the experience levels necessary to handle service delivery issues.
50
What is the significance of cloud computing in service delivery?
Cloud computing allows services to be delivered online, enabling scalability and eliminating the need for local software installations.
51
Fill in the blank: Cloud-based service providers shift their business model to an entirely _______ cost model.
variable
52
What is the key change in capacity for web-based services?
Web-based services enable massive scalability at very little extra cost.
53
What is a challenge related to managing projects in web-based services?
Managing scope control, recoverability, and the ability to sell value remains critical to profitability.
54
How does the web-based service model change customer interaction?
It passes some tasks back to the customer, such as filling in online forms and managing their bookings.
55
What is the role of people in the web-based service model?
People are critical for building and troubleshooting systems that deliver web services.
56
What is the impact of skilled personnel on productivity in web-based services?
The productivity benefits of web services are directly linked to the skills and innovation of technical personnel.
57
What remains a core requirement to succeed in the service business model?
People management ## Footnote Those with technical skills to set up, configure, and manage systems are at a premium.
58
How does the web-based service model affect customer involvement?
It passes work back to the customer ## Footnote Similar to supermarkets making customers do their own pick and pack.
59
What are some tasks customers are willing to perform in a web-based service model?
* Filling in online forms * Searching for the best deals * Assembling their own packages * Configuring their own reports * Specifying their own products * Scheduling delivery times or locations
60
What benefits do customers seek from engaging in additional work in a web-based service model?
* Convenience * Responsiveness * Flexibility * Control over events
61
What does the value creation (VC) tree framework model represent?
It maps the major elements of the typical service provider income statement and balance sheet.
62
What is the focus of the service-based business model compared to product-based models?
Leveraging human capital instead of working capital.
63
What is the impact of operating profit on value creation in a service provider?
Value creation is heavily dependent on operating profit.
64
What does the left-hand side of the value creation tree focus on?
The income statement dimension of the business model.
65
Why is working capital important for service providers?
They usually do not have substantial capital financing and need to manage limited cash resources.
66
What do the darkened boxes in the value creation tree represent?
Measures specific to a service provider that are critical to their business model.
67
What will the following chapters define and discuss regarding service business model measures?
The measures that matter and variations based on real-world examples.
68
What is a recommended source for understanding measures related to managing professional service firms?
David Maister’s Managing the Professional Service Firm.
69
What is essential to ask regarding the measures seen in service providers?
How each company has calculated the measures.
70
Fill in the blank: The level of profit made in excess of the cost of the capital deployed to generate those profits is known as _______.
[value created]
71
True or False: There are formal accounting standards for calculating measures specific to service providers.
False

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