From Products to Services

November 14, 2012

From Products to Services - the Future Approach for Business

Do Sweat the Small Stuff
As any avid backcountry backpacker can tell you, things can change quickly.  A storm may roll in.  A wild animal may appear.  An ankle could accidentally give on an unseen root. For most backpackers, these radical changes have been accounted for, ruminated on, and planned for ahead of time.  If a storm rolls in, the backpacker knows of the nearest shelter or is prepared to built a makeshift lean-to.  If a rattlesnake appears on the trail, the backpacker knows to back away slowly, with walking stick as a line of defense.  If she sprains her ankle, a packed phone and a hiking buddy provide assistance.  Disaster can easily be averted with simple forethought.

In contrast, the most dangerous and life threatening risks to the backpacker are those that are subtle, slowly changing, and unexamined. For example, a water bottle that was not tightly sealed and slowly emptied.  Such relatively low grade risks are often not planned for ahead of time.  Yet, an empty water bottle is suddenly THE greatest risk at hand.  Finding water is now the most important, the only important activity at hand.

The leaking water bottle is a great metaphor for the risks facing large corporations in today’s global economy.  Most corporations are designed and operated to sell products, i.e. tangible things that can be put in boxes, shipped, used, and most often thrown away.  This model is utterly dependent on “the water bottle” being sufficiently full, i.e. all of the natural resources that go into making, shipping and using the product is “the water in the bottle”.

Like our backpacker who failed to check in on her slowly leaking water bottle, many of today’s corporations are continuing their trek with the assumption that the needed natural resources will be there to keep them going.

They may not be there.  Not using the current “Product-oriented” model of business.

Leading companies have shifted from this out-dated model and are embracing an inverted model: the service and experience-focused model, which provides customers a service and an experience, not a product.

The Future is Already Here
Let’s consider some leading examples:

The Cover Your Body Responsibly Experience

This clothing company does not provide shirts.  It provides warmth and coverage from the sun that will be there year after year.  Wouldn’t it be great to design and sell a shirt that is returned to you by your customer so that you could use it again to provide your service again?  It is great.  It is called Patagonia’s Common Threads Program.

The Move Your Family Safely and Sustainably Experience

This tire company does not provide four rubber wheels.  They provide mobility for the frame of your car, that takes you and your family to life’s destinations, without destroying the environment.  Wouldn’t it be amazing if a tire company took responsibility for capturing and reusing every tire they sold. It is amazing. It is called the Bridgestone Spent Tire Program.

The Buy Life’s Necessities Without a Carbon Footprint Experience

This retail store does not provide food and household goods. It provides nourishment and shelter services.  Wouldn’t it be awesome if a retailer worked to only sell sustainable necessities while creating zero waste and using only renewable energy? It is awesome and it’s being advanced by Wal-Mart.

Starting Out Service-based
Some small start-ups are out thinking big companies and quickly growing in the process. One company, Method, has rewritten the rules for the household cleaning industry, making it a fun, enjoyable, and non-toxic experience to clean your house. They’ve also pioneered a new bottle for their cleaners that is made from waste plastic that’s been collected from floating cess pools in the middle of the oceans. Their success in creating an service-based experience led to rapid growth, from $17M in sales in 2003 to $71M in 2007. Recently, they’ve been purchased by Ecover, the UK’s leading sustainable cleaning products company, and together the companies have over $200M in revenue.

Another quickly growing start-up, Monkey Bar Gym, is out-maneuvering established competitors in the fitness industry. Instead of capital and resource-heavy gyms full of expensive equipment, Monkey Bar Gym uses a few simple rubber bands, some pull up bars, and body-weight focused exercise classes to turn people into the best shape of their lives. The camaraderie of classes brings people together more than plodding on a treadmill and the functional fitness creates stronger, healthier bodies. Not to mention, MBG is the “Greenest Gym in the World.” With the focus on service/experience, MBG has grown from 1 little gym to 14 across the world in just a few years, with little signs of slowing down.

Back to the Trail
Now, imagine hiking through a land of endless rushing springs where water is always in sight. No need to worry about the water bottle now. In essence, these companies are beginning to hike where the resources are not only aplenty, but sustainable in perpetuity. They’re creating their own resources or reusing what already exists.

In contrast, lagging companies are the backpackers who have wandered out of the hills and into an arid desert. No matter their effort, they’ll quickly be someone else’s lunch.

Take a look at Blockbuster, a once vast empire of bustling movie rental stores, who ever so quickly filed bankruptcy after their last gasp of 2010...”no late fees!” In the meantime, Netflix had built its own expire of at-your-fingertip content anywhere you want it. With no late fees. And a much smaller, more resourceful carbon footprint. Similarly, Borders, brick-and-mortar bookstore juggernaut is going the way of the dodo, selling to Barnes and Noble and closing hundreds of locations because they built their company on the resource-heavy book sales. On the flip side, Amazon.com is also selling books, but with a service-focused model that does it far more efficiently, conveniently, and cost-effectively. The conventional grocery industry is in similar jeopardy, with sales stagnating for many cheap, low-quality foods, while the organic sector is still seeing consistent year-over-year growth. Organic food is not only healthier for its consumers, it also is grown in a process that enriches the land where it grows and plans for a long-term bounty instead a short-term high yields that diminish the health of the soil. Over time, organic food growing methods are bound to be the norm as resource-heavy growing methods “run out of water” (figuratively and literally) and become costly to produce.

Make-Ship-Toss May Describe the Outlook for Your Business
These companies and methods are sitting on a pristine hillside, overlooking a desert as their water bottles leak. The problem is the route they’ve chosen is through the desert. Is there time to change course?

These few examples show how the make-ship-toss product-oriented model of business is quickly giving way to a new strategic model that focuses on service and experience with resources that will always be there. With some foresight, your business can begin providing a service-oriented strategic model  and capture the opportunity that the new resource-constrained global economy provides.

Now, let’s go hiking with our water bottles full and secure!

 

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