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In a service-driven marketplace, the focus needs to shift from the line of production to a different line; the front line. The line of production is a one-way arrow, starting with raw materials and suppliers and ending with the customer who buys the product.

But the front line is not a one-way arrow, so much as a boundary, like the cold front in a weather pattern: it’s the edge of the organization, the interface where customers and the company interact.
Optimizing for the production line and optimizing for the front line require fundamentally different kinds of organization.

A production line requires efficiency. Inputs can be standardized, and environments and processes can be internally controlled. A front line requires optionality. Front line people deal with environments and circumstances that cannot be predicted. What they need are support systems that they can access as needed, like “call a friend” on Who Wants to be a Millionaire.

A company that’s organized for production can measure quality internally and objectively. Product quality can be defined by the degree to which a physical object conforms to, or varies from, a standard template.

But a company organized to provide services has no physical product to measure. Services are experiences, and the only quality measure that matters is subjective: how the customer perceives the experience.

Thus, most service companies are focusing on the wrong things: they are doing the wrong things, and they are measuring the wrong things. No wonder customers are frustrated.

When your customer is dissatisfied, there are only two possible outcomes. Either the issue is resolved to the customer's satisfaction or it isn't. Trying to reduce or outsource your customer support costs might actually cost you a lot more in the long run, as you lose customers and they badmouth you to all their friends.

Consider what happens when you focus on costs in your customer service operations:

The cheapest customer support call is the one that doesn't happen at all. Of course, you don't know why the customer didn't call you. Maybe they were happy with your service, or maybe they just didn't have the time or energy to fight their way upstream through your draconian support system. There's just no way to know.

If you're lucky and they do call you, there are still two possible outcomes. You satisfy the customer or you don’t. Probably the cheaper outcome from a functional, departmental, cost-accounting perspective is the one where you quickly tell them it's not possible or it's not your department. You can mark that "resolved, not my department" and forget about it. Maybe the customer will give up at that point.

If you're still lucky, your customer will be patient as you bounce them around your system till they find the department that might be able to solve their problem. Once again you have two possible outcomes. You satisfy the customer or you don’t. Of course while the customer bounces around they might get a little frustrated, but that's okay, because that's not your cost, it's the customer's cost. It's an "externality" and it doesn't show up in your cost-accounting system.

Now that the customer has finally reached the right department, you still have two possible outcomes: you can resolve their problem or not. It's probably going to be cheaper not to solve their problem, because most of the time solutions have some kind of cost. You might have to accept a return or credit the customer's account. If the situation is not in the service rep's rule book, the service rep might not be able to help.

If you're lucky, the customer will ask to speak to a supervisor. At that point there are still two possible outcomes. You can solve the customer's problem or say no. It's probably cheaper to say no, for the reasons outlined above. But maybe the supervisor will say yes, in which case there's a chance your customer will be satisfied.

Customers will put up with this kind of treatment only for so long. Eventually they will find another company that treats them better. That would be great for you though, right? Because the cost of serving someone else's customer is zero! Yay for the cost savings team!

Then, when your customer tells all their friends about their experience, you will lose more customers. Your call center costs will continue to go down. At some point when the last customer has left, you can eliminate your call center altogether. Total cost victory achieved.

Most services cannot reduce the variety of their inputs and control their environment as easily as fast-food restaurants. Customer demand is not usually so easily standardized and regulated. Customers have many problems to solve in their lives. They have many jobs that need doing, and only a few of them can be easily reduced to a small set of standard inputs.

Customers have a tendency to resist standardization. The more you try to standardize their service requests, the more you will piss them off. Not a good recipe for customer satisfaction or long-term business growth.
In most cases, service providers must reorganize to absorb variety rather than reduce or contain it.

Online shoe store Zappos’ call centers are designed to absorb variety. Most call centers look at customer support as a cost. After all, if you have already been paid for a product and delivered it, then you already have your money and any additional effort on your part will cost you money, right? Zappos looks at the equation differently.

Zappos knows that a customer call probably represents a very tiny fraction of their total interactions with the company. Unlike most online retailers, Zappos encourages person-to-person contact. Zappos publishes their 1-800 number on every page of their site. Online stores don’t get a lot of chances for real human contact with customers, and Zappos does everything they can to turn customer calls into positive, human experiences that customers will remember. Their number one goal is to deliver experiences that are so great they are worth talking about.
The first step in creating a great customer experience is hiring the right people in the first place. After four weeks of training, Zappos call center reps are offered $3,000 to quit immediately. Remember, this is for an $11-an-hour job.

By offering people money to quit, Zappos ensures that the people they hire are really excited about working there.
At Zappos, there are no “customer service scripts” or pre-set time limits for customer support calls. Reps are encouraged to take as much time as necessary to solve the customer’s problem, and their mission is to provide the best customer service possible. Zappos has a 100% satisfaction guaranteed return policy. After the call, service reps follow up and keep their promises, and send a personal note as part of their follow-up.

Good customers are profitable customers. Zappos treats frequent customers well, with surprises like upgrades from standard ground shipping to next-day air.

Making customers happy, says CEO Tony Hsieh, leads to cost savings elsewhere, like marketing. “We let our customers do our marketing” he says.

By making sure they get the right people and giving them the autonomy and authority they need to serve customers, Zappos call centers are designed to absorb variety, not contain it.