- November 3, 2022
Hyatt Hotels global senior executive Jonathan Frolich ran into a cultural roadblock when he pitched the company's new customer engagement ideals to a group of high-level Japanese colleagues.
The general idea is to use empathy to generate a new playbook for what hotel guests expect and how to deliver it. That kind of compassion-first approach is a key component of service design, a business concept that's recently gained prominence in the United States. It is essentially the idea that companies should design services for customers that eliminate all hassles — the same way good product design is supposed to work.
It's also a discipline that companies from Disney to Netflix use to redefine brands, improve customer service and bolster employee morale. The tourism industry has especially embraced service design. “We need to ask probing questions,” says Frolich, “and then it comes down to listening like we've never listened before.”
But it turns out there's no direct English-to-Japanese translation for the word empathy. Frolich's group, after several discussions, came up with a close alternative: from the heart.
That sentiment, say several service design disciples, is an apropos explanation of how the concept works and how important it is for companies to understand and utilize it.
Service design was initially an academic theory taught in the early 1990s in Germany. Universities from Carnegie Mellon to Stanford now include some elements of service design in curriculums. And prominent consulting firm McKinsey & Co. incorporates service design into its practice and research.
More than 40 of the world's service design leaders, including Frolich, recently spent three days in Sarasota for the second annual International Service Design + Tourism Conference. Ringling College of Art and Design co-hosted the event, held from Nov. 7 to Nov. 9.
Ringling President Larry Thompson says service design, more than an abstract academic concept, has big implications for Florida's economy, where tourism, and its $51.14 billion impact, is a leading force. Thompson says Ringling might even add a service design major.
“This conference is really fantastic,” Thompson says. “It's trying to educate people that design is broader than most people think. This is important for all kinds of businesses.”
Marc Stickdorn, a teacher at the Management Center Innsbruck in Austria, which hosted the conference last year and co-hosted it this year, adds that service design is accessible to businesses of all sizes. “Service design isn't rocket science,” says Stickdorn. “It's something really simple. You can do it and try it out.”
Frolich and Simon Bradley, vice president of marketing for Virgin Atlantic, were the keynote speakers on the last day of the conference. Here's an overview of how each company incorporates service design concepts into its overall strategy.
Ready to fly
Service design at Virgin Atlantic, says Bradley, follows a mission its founder and world-famous entrepreneur Richard Branson brings to all his business ventures: Stay simple and be intimate.
So Virgin Atlantic, in the Hyatt service design mold, deeply listens to customers, through surveys and conversations. “We out-small the competition,” Bradley says. “That's our internal mantra. We can't compete on price or scale, but we can compete on brand and service.”
Bradley cites two examples of how the firm executes that mantra, both traced back to service design. One was Virgin Atlantic's response to British Airways decision to build a multibillion-dollar terminal at Heathrow Airport in London. The airport is a British Airways hub and a primary operating base for Virgin Atlantic.
Virgin Atlantic, says Bradley, sought to avoid a terminal tussle with its much bigger competitor. It instead looked to what could make customers enjoy the flying experience more.
That led Virgin Atlantic to develop its Upper Class Wing at Heathrow. Customers there, in the high-end of the airline's price structure, get picked up at home or at the hotel by limo. A GPS system alerts a Virgin Atlantic flight crew when the limo is 10 minutes out from Heathrow, says Bradley. Then, when the car pulls up to the curb, the customer goes through the boarding process while still inside. The traveler, finally, is whisked through a pre-arranged private security gate and taken directly to the plane.
“It was a great low-cost investment, but it was high-touch,” Bradley says. “That's how we out-small the competition.”
The airline took the same approach, albeit a more costly one, says Bradley, when it built a new clubhouse for customers at John F. Kennedy Airport in New York City. The hip facility has a hair salon, a Jacuzzi and a spa. It also has a first-class bar and restaurant. “When we open a lounge,” quips Bradley, “we don't do it with sticks of celery and carrots and ranch dressing.”
The clubhouse, in a move straight from empathic service design, even allows customers on overnight flights to change into pajamas — before they board the plane.
The $7 million clubhouse project, Bradley concedes, is a “cost center, not a profit center.” But he counters that to succeed in the tightly competitive airline industry, “you have to do all the little things that make a difference.”
One difference between Virgin Atlantic's approach to service design and what Hyatt does is scale. In fact, Hyatt, led by Frolich, has incorporated the strategy into every aspect of its business over the past year. That includes more than 500 hotels worldwide and another 300 in the pipeline.
Frolich started with the chain 19 years ago when he worked a bellhop post in his native Australia. He says the key to Hyatt's service design philosophy is it's infused with a sense of urgency while it maintains the core principle of understanding customers' needs. “It's a huge shift to move a company from operating hotel products to producing caring experiences,” Frolich says. “The pace of change is unbelievable.”
So fast that in the past year, says Frolich, Hyatt has sent more than 1,000 hotel executives and managers, including CEO Mark Hoplamazian, to one of 22 global service design boot camps. While the camps weren't full-blown kumbaya sessions, the executives did engage in unique problem solving simulations. There were no chairs during the meetings, for one, and many participants wore goofy customs and posed for pictures with piÃ±atas.
The results, though, were serious. “We found that executives had an appetite for this experience,” says Frolich. “It's another tool for them to solve problems.”
That's what some officials with a Hyatt in San Francisco did when they renovated the lobby. They shifted the entire concept of a check-in desk, from a bland, bank-teller-like feel that sets up a boundary to a modern, relaxed vibe. The desk is not even a desk now, but more like a walk-up bar.
The San Francisco Hyatt team followed the firm's service design philosophy, which, says Frolich, is to work like the old rules and brand standards no longer apply. Says Frolich: “We have to figure out ways to change the status quo.”
The alteration, at least in the short-term, works. Frolich says guest stays of at least three nights increased 12% over the past year, while revenues rose 17%. Plus, RevPAR, a key industry metric that measures revenue per available room, is also up double digits since the company began to utilize service design.
“It's just the beginning of the journey,” Frolich says, “but we are seeing some incredible results.”
Sarasota entrepreneur Anand Pallegar has an unusual relationship with service design.
The gist of service design is when businesses take an empathic approach to understanding client's needs. Pallegar fully embraces that strategy at atLarge, a Sarasota-based Web design and marketing firm he founded in 2006 that now has 24 employees and a second office in Manchester, England. (The Observer Media Group, publisher of the Business Observer is an atLarge client.)
Yet Pallegar's passion for service design doesn't actually extend to the phrase service design, which he calls something of a misnomer. “Using the term service design doesn't really mean anything,” Pallegar says. “At the end of the day, service design is about connecting a customer to a brand. It's a new way of thinking about it.”
Service design has gained prominence recently in the tourism industry. But Pallegar, like others who use service design, says any company can do it, regardless of the industry.
AtLarge, for example, begins every new project with a client by creating what Pallegar calls a journey map. That's when the staff looks at every angle of the business using service design, from the beginning of the product or service to the end. The firm takes what it learns to create a website and Web strategy.
Pallegar essentially doesn't have to remind employees to use service design on a project — it's just part of what they do. “We have a sense of curiosity,” says Pallegar. “It's inherent in our DNA.”