Everyone is talking about innovation and digital. The words are getting washed up completely and it’s fair to ask if this is a hype that will pass. I’d argue that it won’t. I’d argue that this is the new norm and it will be commoditized just like having a “home page” or an “app” have.
The driver behind this is our expectation of experiences. We do not want to exchange money for things anymore, we expect that for what we pay, companies should give us an experience.
Build a Bear
Build a bear is a prime example where a simple product becomes an experience. They have turned the cuddly bear from a toy you buy and play with to a toy and a service.
As a customer you start by going to their store and build your bear. You go through the experience of selecting body, head and accessories. You pay more for fancy stuff of course.
Image from careers.buildabear.com
What is unique is that the bear then get’s a virtual persona where you can play with your bear online, send it to the north pole and you will receive post cards from it’s trip.
Build a bear has been innovative around the cuddly bear. They’ve turned a toy product into a service they can charge a premium for.
Moving from products and services to experiences.
We expect experiences with what we buy. No matter if it is a product or a service. This can range from your café experience to buying a car.
A business that wants to stay relevant and not get into a price war needs to start building these experiences for their customers. They need to shift from product innovation to service innovation.
Build a bear does this beautifully. They are not throwing themselves into a price war where the only increase in margin can come from lowering their cost of manufacturing. They create experiences that are unique. Experiences they can charge a premium for. By adding more services to the experience they make it hard for a competitor to copy their service chain without a huge investment up front.
At Avanade we see this shift in most of our consumer goods clients. They are all trying to figure out how add to the experience and turn their products into services. In our services clients we see a push to chaining services together to make their unique experience hard to copy. Banks are investing heavily in this now. Moving deeper into your household economy with apps and online services.
This is only logical. We as consumers, or buyers, are lazy. We want our experiences to be easy. If my travel agency takes care of everything for me, I’ll pay for that service. If my coffee machine maker calls me when I need to cleanse my machine, I’ll pay a premium for the machine. If my phone gives me all the services I need. I’ll never switch.
Same old, same old?
We have of course always loved it when the customer service is great. We gladly tip our waiter if we had good service. In that sense, turning products into services and chaining them together is nothing new. What is new is that companies that aren’t pure service companies are investing into this. They are switching from gaining value in the exchange of goods to gaining value in creating experiences.
There is an opportunity for you here.
One of the most important enablers of this is technology. As developers, architects and technology leaders we play a huge role in creating these services. Build a bear wouldn’t be successful without the technology component, nor would the banks.
The shift from product dominance to service dominance is a huge opportunity for us as technologists to truly disrupt and create unique values. Most businesses do not understand technology as well as you and have a hard time to turn technical advancements into innovation for their market.
There is a huge amount of cool work to be done. Go fetch.
Service Dominant Logic (wikipedia)
Service Innovation – A Service – Dominant Logic Perspective (research paper)
Competing in a service economy (eBook)
From Software as product to Software as a Service (blog post)