I have been struck recently by how many times I have been in conversations about what I think I can best describe as the ‘removal of value’ from products, or at least the failure to create a sustainable business proposition. Most alarmingly most of these stories are connected with new markets and the delivery of products as ‘services’, the very change that the new technologies are being adopted for by the business world. The one that sparked off this Blog piece was an interesting story in the Ecconomist.com about Online Social Networks, with the sub title ‘Social Networking will become a ubiquitous feature of online life. That does not mean it is a business’.
The point was that every new ‘service’ even if it pulls in millions of people does not necessarily have a business model, and that advertising cannot be the revenue generator for everything. The comparison point was with mail services, once seen as a key new market with Microsoft buying Hotmail, and various other big names making their own acquisitions, but today nobody has a business model generating revenue from what is still a free service, albeit now enormously upgraded in terms of amounts of storage, etc, to levels that would not have seen feasible five years ago. Why persist with providing it at all? Answer, because it is cheap to operate and keeps the millions of users within the brand and websites of the operators. So to be successful it’s the old rule, something to grab attention, a supermarket might call it a loss leader, and something else to create revenue and profits.
I used the term ‘utilities’ to indicate the nature of some of these new services, meaning that they are used by all, but do not have any differentiating argument in favour of one utility over another except price. Water and Electricity are examples, same product from different suppliers; email and instant messaging; indeed Social Networks are equally capable of being seen in the same way. I want, and need, to use these services, but why is one better than another? Let’s take another example; Dealers selling new cars on eBay in the USA. On the one hand it’s a new channel addressed by new ‘services’, and now accounts for up to 40% of the market for some models; on the other hand it has significantly lowered the prices achieved for new cars as it has destroyed value. How? A complete lack of differentiation to add value as all dealers stock identical ‘fully loaded’ models therefore the only difference can be the price they will accept.
Capgemini uses the term ‘Sector as a Service’, and you will notice it does not say ‘Product as a Service’, which in reality is what the examples given are, same product but different access channel. As a technologist my interest in this topic is based on the correct design of a service, or even a sticky utility that I will stay with, being largely determined by two factors; 1) the recognition of what the online generation wants that will help them with managing their technology and associated life style issues; 2) the availability of technology to align with 1).
I am slow to change from ‘services’ that have binding elements that I would have to work hard to ‘move’, be it address books, or photos, or relationships that I continuously use. In short the more I use a service the more commitment I should have to it through building content, or value, into its framework. As a test think about ‘FriendsReUnited’, once the most popular of sites, but once I have found my old school chums and got in touch it has no on going value. Compare this DopplR the social networking add on app that allows me to place my travel itinerary so that the people I have choosen can see when I will be in their home towns and get in touch. This is of continuous use, and high value, to my lifestyle, it also provides a huge amount of opportunity to increase the ‘interactions’ between the people involved, and what they might need; Hotels, Restaurants, Meeting Places, Hire Cars etc.
Okay so it’s a utility in the sense I wouldn’t pay to use it, but would I pay for the additional services that it could offer me? Yes, I know I would have to buy them anyway, but if you can link them to the organisational stuff which I have already placed into DopplR then of course it’s the easiest way for me to buy, or perhaps it would be better to use the word ‘consume’ as services. To me that is a good example of a ‘sector as a service’, as it brings the whole activity in the sector together, and makes it a service to my plans. The contrast lies in having to find and buy the elements separately online, sure if can be done, but that’s a product as a service. What makes the difference? Answer the integration of multiple technologies to provide a complete and comprehensive sector approach versus enabling by taking the previous product on line. Oh! and of course one has created a new and unique set of values for me to consume whilst the other just sells me the same old non differentiated product in a manner that makes it easy for me to check the pricing, and destroy its initial value.