Ahead of its time: Services program plays critical role in business community

As the Center for Services Leadership at the W. P. Carey School of Business enters its third decade, its founders recall a time when they faced off with skeptics who doubted the importance of services in business education. Today, the Center has earned an international reputation for outstanding research and education in the field.

Mary Jo Bitner can laugh at the memory now. But there was a time, in the early days of the Center for Services Leadership, when Bitner couldn't help but wonder if she had made the wrong career choice.

It was the late 1980s, and Bitner was among a small minority of business academics who had the then-radical idea that business services had to be marketed and managed differently than products rolling off an assembly line. Along with her colleagues at the fledgling Center for Services Leadership at the W. P. Carey School of Business, Bitner found herself on the cutting edge of business scholarship — and facing down skeptics who thought she should be putting her talents to use elsewhere.

"There were times when people would say to me, Well, you can do this for a couple years, but then this fad of services is going to go away — and then you ll need to find something else to do, " said Bitner. "And anytime you re doing something that s considered a little risky, sure, you think Those people could be right. But we were fairly confident." Justifiably so.

Because two decades after it was founded — and a seeming eternity from a time when anyone could have doubted the importance of services to business — the Center for Services Leadership has earned respect internationally for research and education in the field. Its programs help executives, students and academics better compete through service or services. Despite the warnings those skeptics, Bitner has not been forced to find another line of work and the field of business services is enjoying the kind of boom hardly anyone could have predicted when the center was in its infancy.

"We were really ahead of our time," remembers Stephen Brown, professor and founder of the center. "There were maybe a handful of academics and business people who were interested in the services area, but there was no organized entity to study it. We were it." Certainly, the center — and the field of business services — has come a long way since Brown launched it 20 years ago.

More companies than ever are recognizing that services can be their bridge to the future, and executives are using services to separate their companies from the competition, win customer loyalty and drive profits. It is a trend that promises to continue in years to come.

"There was a lot of resistance to our idea early on," Brown said.

"But a lot of us were young and brash, maybe a little too brash, and were willing to hold our ground and push the envelope. Over time, we've been proven to be correct." The center was born at a time of upheaval in the U.S. economy, and of self-examination at ASU s business school. The Reagan administration in the early- to mid-1980s had moved to de-regulate several major service-oriented industries, including banks and transportation.

The sweeping reforms opened those industries to a world of new possibilities — but neither executives nor academics knew how to react, Brown said.

Brown saw the upheaval and uncertainty as an opportunity for W. P. Carey, and as a member of a task force evaluating the school's marketing programs, he and others suggested the school launch a research center in the discipline. "It was a time that was ripe for this kind of center," Brown said. "Overshadowed by the downfall of communism was this decentralization of the service sector of the economy. And inside the marketing department, there was a feeling that services would be a good area, because it could rally quite a few people in the department who could take their interest and apply it to service."

The center was launched in 1985. Brown and his team then set out to spread their message. They approached companies large and small, explaining the growing importance of services in the changing economy. Companies that understood their basic argument — that services had to be managed, marketed and offered differently than products — could get a leg up on the competition, they explained.

It remains the center's core message today.

"It's not just marketing — it's the whole set of management and delivery of services that has to be different than for a product," Bitner said. "A product will roll off a line and it will look the same pretty much every time. But with services, there's a lot of variability. There's a human element."

Brown, Bitner and their colleagues believed in what they were selling. They just weren t sure anyone else was quite ready for hear it. They had to build trust — and let history play out.

"We were taking a risk," Brown said. "When we first started talking to firms, we didn t have a lot to talk about, other than a vision — basically to be a renowned university center focusing on how we can help companies compete through service. There wasn t even a field focused on service. We were helping launch that field."

Ever since, the center has been at the forefront of that field — and, as such, has been able to track the changes that have so radically redefined the nature of American business. Technology, especially, is altering the very nature of services, making the field almost unrecognizable from the one Brown saw 20 years ago.

"You can t really think of anything we bought 20 year ago that was facilitated by technology," Brown said. "But now most bank transactions are done through personal computers or ATMs — that's technology. We pay for our gas, at the pump, on our own. You can buy airline tickets online. So the best services technologies have actually replaced the employee as the service provider. That s a huge development and it's something we're very aware of."

More broadly, Brown and Bitner say the biggest change in the services field from two decades ago is the simple fact that services are now common, across all industries. It seems that most any company, no matter its focus, can gain a competitive edge through services.

"We still help firms that are pure service firms, but there's a huge trend in the Western economies where we are seeing companies that are traditional manufacturers, or traditional distributors, who are trying to reinvent themselves into what are often referred to as solutions providers," Brown said.

Many of these companies probably once considered services an afterthought.But the success of many services-based companies, and the increasing difficulty of surviving as a "commodity-based" company alone, has upped the ante on services offerings."Your competitiveness as a manufacturer or a distributor is very fleeting today, because people can copy your product and have it on the market in a matter of months, or weeks," Brown said.

"What firms are discovering is that it's easier to sustain profit margins and sustain a difference in the marketplace through services than through products." In the U.S., especially, services are becoming more than just a minor focus. IBM and General Electric — two titans of American business — are among the leaders in turning business services into profits, he said.

"Twenty years ago IBM was a product company — they made computers and that was it," Brown said. "Today, IBM is better described as a services company. More than half of their employees work for IBM Global Services, and more than half their profits come from services. General Electric is similar. And many companies want to duplicate what those companies have done."

"There's more and more of a growing awareness among companies that they need to compete on services," agreed Bitner.

Phoenix-based Avnet Inc., a partner company of the center, recognized that fact years ago. As a distributor of high technology, the company found itself in a crowded field. But Steve Church, senior vice president and director of services and strategic business development at Avnet Inc., said a strong focus on services — and tapping the expertise of the experts at the center — has helped the company set itself apart.

The strategy is paying off, too. In fiscal 2004, Avnet generated more than $10 billion in revenue and did business in 68 countries. Church said Avnet s services-oriented strategy is likely to be copied by other firms.

"I believe we're just on the front edge of what s going to be a very strong movement," Church said. "I think it's just the front edge of a sort of a landslide, actually." As a CSL partner company, Avnet has been able to recruit the services-knowledgeable graduates from the W. P. Carey School, network with other partner companies and, of course, tap into the knowledge base offered by center academics. The relationship with the school has been a boon for Avnet, Church said.

"I think it's a symbiotic relationship. We've added some things to the center, and certainly gotten a lot of benefit out of it," Church said. "When you are partnered with people like Arizona State, where you re networking and learning and recruiting, and you re able to give something back, those are things that will only help Avnet."

Church said he's had a career-long interest and appreciation for services, and his association with the center only made him more certain that companies in the modern business world need to put services to work for them — or risk losing customers. "Services are going to be a very big deal," Church said.

Not surprisingly, Brown and Bitner agree, and they say the continued growth of services can only be a good thing for the center. Still, because the field is ever-changing, their challenge will be to keep their center at its very forefront. They will continue the top-level research they've always done, but also plan to reach out more than ever to the business community to raise the center's profile. They hope to attract more executives to the center's high-level programs, and have a significant impact on American business as a whole.

"I'm excited about the future," Bitner said. "I don t see any decline in interest in services. And I don t see our center slowing down, either."