Why a smile could make a difference to public services

A couple of weeks ago I was teaching 53 police officers about managing public money as part of the national High Potential Development Scheme. At one point I was talking about pricing strategies and I drew a idling curve on the board to illustrate the idea that the production of goods creates a smaller part of the value than the design that proceeds it and the marketing that follows. At the time I couldn't remember the person behind it but it has nagged at me until I found the answer. What I was explain got the class was the Stan Shih smile curve of value.

Stan Shih was the boss of Acer computers and he put forward this idea about value in the early 1990s. He was thinking particularly about IT products and the picture above summarises the theory. It seems to me very likely it applies in IT today. Certainly if I think about myself as a customer of Apple then I know I get value from the design of the hardware and software, the packaging, the customer service, the Apple Store. And I can well believe that the cost of the components and assembly of the MacBook Air that I'm typing with amounts to less than 10% of the price I paid for it.

If this is the case for IT companies, is it true for others? Perhaps not all businesses but there are loads where the cost of manufacturing is a tiny proportion of the retail price and a lot of the value of the product comes from the design, branding, marketing, etc. For instance, clothing (how can All Saints get £40 for a cheap-looking t-shirt with a blurry print or replica football shirts sell for £70?), cola and soft drinks, bottled water, restaurants, cosmetics, champagne, brand name painkillers. I'm sure you can think of others.

What has this got to do with public services? Well, public bodies are provide services to the same people who buy all the things I've mentioned above. These people value more than just the creation of the products they buy so when it comes to public services perhaps public bodies should think about:

• how they design their services
• developing their brand and reputation
• how they distribute (or make available) their services to users
• how they will look after users after the service has been delivered.

Going back to the police service, whilst I am not an expert it seems to me that one common issue relates to supporting victims of crime. I might suggest that currently the focus of police leaders is in producing the service so that officers respond quickly to a call and deal with the immediate issues. Aside from anything else, this is a measurable output. How many calls have we taken, graded by urgency? How long has it taken to respond to each?

I think there has been work by senior police officers about the police brand and reputation is important to officers and police and crime commissioners alike. On the Stan Shih curve, brand comes before production. One choice a consumer has about any product is which brand to choose. The only choice a person has after an incident is whether to contact the police at all. I live in Derbyshire; I don't have the option to call in Lancashire Police because I prefer their brand of policing.

The police are less focused, I think, at keeping the victim informed about progress afterwards. If the public derive more value by feeling that they are being 'taken care of' after they were burgled (say) than from the officer's initial visit then the police ought to focus more resources on the former than the latter. But the outputs from this are less tangible and difficult to measure. I wonder, though, whether a change in emphasis would improve public satisfaction.

Minor roadworks

I live in the north west corner of Derbyshire where there aren't major roads or motorways. Over the last few weeks I have come across roadworks on lots of the local roads. Not major roadworks, just one of those machines that scrapes off the top few centimetres of the road surface so that it can be replaced with fresh, smooth tarmac. However, I am sure that I won't be seeing any more of these small schemes next week, or again until next March because it is the end of the financial year.

If I were being cynical I would suggest that these works were only being done to make sure that the budget for 2011/12 was as fully spent as possible. That might be the case but I don't know because I don't have the budgetary control report for Derbyshire County Council. What I do know, though, is that public managers still measure their importance and their success by how much money they spend. Until a few years ago the value of public service as measured in national statistics was deemed to be equal (exactly equal) to how much was spent. So, spending more on the roads (or in hospitals, schools, libraries, wherever) meant more value was created. That's changed now (but I won't go into the detail here) but for many managers it is still the case that if they spend more on their service, they deliver more outputs and that must mean they deliver more value for the public. Sounds fair enough, doesn't it?

If I were being more positive, though, I could suggest that these schemes are taking place now because the council's managers operate in the same way that most people do when faced with a deadline; they leave things until the last possible minute to start and then finish just in time.

Whatever the reason, there are several hundred metres of improved roads all around my neighbourhood and, as a cyclist I value it because it will make my riding in the summer a bit faster and a lot smoother and more comfortable. If they hadn't done it no value would have been created but the question is, would more value have been created if they spent the money on something else?