Business services are activities that support the operations of a company but don’t produce tangible goods. An example of a business service is hiring a construction crew to renovate an office building. Hiring an experienced workforce eliminates the need for the organization to purchase or rent expensive construction tools and equipment. This can be a cost savings, as well as freeing up employees to perform other tasks such as sales and marketing.

While a product business may have an edge over competitors with unique features, a service business is ultimately judged by its ability to attract and retain attractive customers. This requires a different approach to design, with managers shifting their focus from the product itself to the experiences customers will associate with it.

For instance, a restaurant provides a service that’s more than the food itself: ambience and friendly interaction. A utility, like water or electricity, also qualifies as a service, even though it delivers a physical good (water).

Many services are used by businesses to improve their efficiency and allow them to focus on their core competencies. They can also be used to lower overhead costs and to access specialized expertise that they don’t have in-house. Outsourcing can also be a cost-effective way to manage peaks in demand or to expand into new markets.