1.3.2. Service Characteristics: Utility, Warranty, Costs, and Risks

💡 First Principle: A valuable service must be both fit for purpose (Utility) and fit for use (Warranty), balancing the benefits it provides against the costs and risks it introduces.

Scenario: A company launches a new online sales portal. The portal has many advanced features for customers (high utility), but it frequently crashes during peak shopping times (poor warranty). As a result, customers lose trust and sales are lost, diminishing the service's overall value.

Here, we examine the key attributes that define a service's fitness for purpose and use, alongside the financial and risk aspects.

• Utility: The functionality offered by a product or service to meet a particular need ('what it does').
  • Practical Relevance: Does the service do what the customer needs it to do? Understanding the required utility is fundamental to designing and delivering effective services.
• Warranty: The assurance that a product or service will meet agreed requirements ('how it performs' - e.g., availability, capacity, continuity, security).
  • Practical Relevance: Can the service be used as and when needed? Warranty builds confidence in the service. Ensuring warranty requirements are met is crucial for customer satisfaction and trust.
• Cost: Amount of money spent. From consumer view: Costs removed by the service vs. Costs imposed by the service.
  • Practical Relevance: In your role, consider how your activities impact costs. Can you help remove costs for the consumer? Are there costs imposed by the service that could be reduced through efficiency? Managing costs contributes to value.
• Risk: A possible event that could cause harm or loss, or make it harder to achieve objectives. Uncertainty of outcome. Provider manages detailed service delivery risk for consumer.
  • Practical Relevance: Identify and manage risks associated with your work and the services you support. Proactive risk management helps ensure outcomes are achieved and value is protected.

⚠️ Common Pitfall: Focusing only on utility (adding new features) while neglecting warranty (ensuring the service is stable, secure, and available). A feature-rich but unreliable service delivers poor value.

Key Trade-Offs:

• Features vs. Stability: Allocating resources to develop new features (utility) often competes with allocating resources to improve performance, security, and reliability (warranty). A successful service finds the right balance.

Reflection Question: Think of a service that has high utility but poor warranty. How does the poor warranty undermine the value of its features? Conversely, can a service with excellent warranty but low utility be valuable?