tldr

Whether developing a product or providing direct services, every company must position itself along the 3 axes of speed, quality, and cost. You must choose the direction based on your innate capabilities, and work to develop the other axes simultaneously. However, once you decide to prioritize, stick to it and position yourself accordingly. There are customers that need all sorts of services, and one isn’t better than the other.

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Introduction

Price, Speed, and Quality are the three major metrics that determine customer satisfaction of your service. Here, I use the word “service” loosely, as even products are essentially providing a service. A packaged water bottle is quenching your thirst while ensuring you remain germ-free, a vehicle takes you from Place A to Place B, and digital products are called SaaS, or Software as a Service for a reason. Hence, I define a service as everything that takes you from State A to State B, where State B is more preferable to you. Consequently, products are just a bundle of services.

Another way to frame this argument is by using the Jobs-To-Be-Done framework. Instead, I’m calling the jobs-to-be-done a service-to-be-delivered.

When a customer chooses to purchase a service, they will likely evaluate the options based on the aforementioned factors. What exactly do these factors mean in various settings, and how should one prioritize between these?

Price

Price of a service is essentially the overall lifetime cost that you are bearing to take yourself from State A to State B. The cost may not be entirely in terms of hard cash, but also in terms of time, and other softer aspects like brand reputation, mental peace, etc.

It is hard to distinguish between quality and price if the softer aspects are included, so I will use an objective definition for price here. The price of a service is the money that you spend, directly or indirectly to take yourself from State A to State B.

Quality

Quality of a Service is hard to define in some scenarios, while much easier in others. Brands try relentlessly to prove that their products are of a high quality by evaluating them on metrics that they believe would be important to the customers. For example, a brand advertising their toothpaste may mention that it kills 99.99% germs inside your mouth if used. Since the Service that a toothpaste provides is keeping your mouth germ free, fresh and healthy, the brands try to quantify the quality of their product by mentioning how well is the intended service provided.

Defining the quality of products is generally straightforward, as the service to be delivered is very well defined, and the consistency of delivery is high, so it can be measured over hundreds of samples.

But take the example of Service Providers. Since we are in the business of providing AI related Services, I’ll take one of our own examples. We are often asked to build AI models or software that uses existing AI models. However, that is not the service that we are providing. The Service that we provide is either improve the Quality, Reduce the Price, or Improve the Delivery Speed of the customers’ product or services. Now you may think that the quality of our Service can simply be the extent by which we are improving the quality, reducing the price, or improving the delivery speed of the customers’ product or service. Assuming the fact that the customers’ service quality is measured objectively (to avoid circular referencing), this is still a big problem for us.

Why? Because there are a thousand other variables that go into improving these metrics for the customers’ service. Hence, we came up with some other quality metrics like code quality, which is measured by complexity, churn, coverage, security, duplication etc., and AI Model accuracy, which is evaluated over an unbiased dataset. Although these metrics are also hard to measure, it still provides some level of confidence to our customers regarding our quality of service. Ultimately, quality is determined by every customer for themselves, and all a service provider can do is strive to ensure high quality as per the customer’s standards. We ensure that our customers stay in the loop while our quality metrics are decided to achieve this.

For products, this is not possible, so companies choose the metric that most customers value, and measure the quality on it.

Delivery Speed

In a Service, merely going from State A to State B is not enough. When do you reach state B is equally important. This is what Delivery Speed is. Delivery Speed drives customer satisfaction highly in some scenarios, whereas it is of negligible importance in others.

For example, a High Frequency Trader will probably make billions if she is able to figure out a way to gain information on stock prices a few milli seconds before her competitors. The delivery speed of this service is of high value, and the value of that service becomes 0 if the speed falls below a few hundred milliseconds.

On the other hand, imagine Shah Jahan building the Taj Mahal. It was of no consequence to him when the structure was completed, just that it was done before his life ended. Consequently, it took 22 years to complete the construction and yet, I believe he must have been happy.

In general, speed of delivery matters the most when you are competing in a winner takes all market, and each service delivered takes you closer to capturing the entire market. It matters much less when you are in a space where breakthroughs happen once in decades, and there is no one else competing for it.

How do you Prioritize between the 3?

There is no correct answer for which one of the 3 should be prioritized, as almost always, there are multiple customer segments and each one values a different combination of the 3. Continuing the previous example, although the High Frequency Trader values speed extremely highly, the speed is of no use if the information provided is incorrect, or if you price the information higher than the profit that the Trader can make. Hence, even in cluttered spaces, there is a small scope for positioning.

Coming back to the question at hand, how do you prioritize between the 3? The prioritization is a function of your innate capabilities and your primary customer segment.

To provide a high quality service, you would require high quality talent working on it. Building a high quality product is no different. If it needs to be done within a reasonable budget, highly talented individuals must work on its development. So if you’re considering prioritizing quality as your metric, consider how easily can you procure high quality talent. Procuring talent is not merely a function of the salaries that you pay, it is also heavily determined by how much growth you are offering them, whether your vision inspires them, and whether you are someone they would want to work with. If any of these factors is not true, you will need to pay them extra in the form of salaries.

To provide a high delivery speed, you need robust, streamlined, and standardized processes that everyone understands. To gauge if you can do this, you need to build an organization with strict rules and guardrails in place that ensure that production happens at a break neck speed. Gauge whether this is the type of culture you as a leader thrive in, or if you can hire a capable leader who can ensure this.

To provide low prices, you must be able to ruthlessly prioritize the high priority items within your service and cut out all the “customer delight” features. You must also be efficient at sourcing moderate talent at extremely low prices and have a great scouting mechanism for the same.

Why can’t I do all?

If you’re thinking that I can do all of the above, then you’re not wrong. All companies strive to improve their services on all the metrics all the time. But there are moments where you must choose one or two of the three while sacrificing the others. These moments define the direction that you go in and make your positioning evident to the customers.

Take the scenario of your promised delivery date being tomorrow, and you discover last moment not so critical bugs in the software to be delivered. Now you either deliver it as it is ensuring rapid delivery, or you pick up the phone and let your customer know that the code won’t be up to your quality standards if delivered tomorrow, so you need additional time even if it results in penalization.

Similarly, there come scenarios where you are heavily outbid by your competitors because you operate in a premium segment while your competitors operate in the value segment. Now you may either choose to match their bids and later cut corners to ensure profitability, or you put your foot down and convince the customers why the price is that high.

This decision is driven by the founders and leaders in the organization who create the company culture. Once a company decides to go down a particular path, it is difficult to change your positioning. Product companies do this by launching new brands that are positioned differently, but services companies find it much harder. Even large services companies like WITCH (acronym for Wipro, Infosys, TCS, Capgemini, and HCL) find it difficult to demand a premium on their projects, whereas specialized consulting firms like Bain, BCG, McKinsey never attempt to compete on costs with the Big Four.

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