Moving from offering products to providing services in business is one of those deceptively simple ideas. Conceptually, it makes perfect sense. But put into practice? That’s a whole different kettle of fish.
Those familiar with software and IT will know the term ‘xxx-as-a-Service’ only too well, but for the rest of us – while it’s quite clear what a service is – the implications of a service for your business model may be somewhat confusing.
Let’s shed some light on how different companies are making the Services Shift – and what that means.
Why is this shift happening?
The growth of the digital economy, a greater awareness of customers needs, and better connected communities – on a local and global level – has led more and more companies to focus their attention on understanding needs and not just selling products.
In the past, many businesses followed a product business model – one whose goal was to develop and manufacture products efficiently, before getting them to customers, using all the sales and marketing might at their disposal.
In this business model, new product features are needed to demonstrate their superiority over previous incarnations. Otherwise, existing customers get little incentive to buy.
The Services shift however takes a broader view. Essentially, the emphasis is not on the product, but on the purpose it serves – the problem it solves for customers.
For example, people don’t (necessarily) want a car: they want to travel somewhere. Sure, it could be argued that the product itself satisfies a specific need, but from a consumer’s perspective, ownership can be substituted by access.
In short, it’s cheaper, more convenient, and faster to use something rather than own something. This also ensures that the customer gets the best version of the product on offer every single time.
Services shift story: BMW.
It’s hard to deny the increasing pace of urbanisation. By 2050 it’s thought that nearly three quarters of the world’s population will live in what is classed as ‘urban’ areas.
In addressing this shift, renowned car manufacturer, BMW, decided to shift its focus from ‘building cars’ to ‘getting people from point A to point B.’
In BMW‘s vision of the future, mobility is what counts. Freedom of movement needs to be easy, fast, and smooth – powered by an electric, self-driving, self-charging fleet of vehicles that take people to their destination in an on-demand “hop-on, hop-off” model.
Is this type of mobility a far-out dream for BMW? Not at all. The company has taken careful steps towards getting there – starting with its electric car-sharing initiative “Drive Now” in San Francisco in 2011, followed by the all-electric compact car BMW i3, and expanding their range of mobility services by working with startups.
BMW has since secured 1 million Drive Now customers across 13 cities and eight countries. More recently, they joined forces with Daimler AG to launch "YourNow," a group of companies offering a variety of mobility services to reinvent mobility completely for 4 million customers in over 31 cities.
A new mindset.
But it’s not just BMW or the automotive sector adjusting its perspective. Our book provides case studies of a variety of brands, all embracing the Services shift. To mention a few:
Medtronic, the medical device company that invented the pacemaker, moving into services for hospitals that brings the healthcare system to the next level;
Swapfiets, a startup from Delft, The Netherlands, that ensures your bike never lets you down again;
Dollar Shave Club, fixing the terribly broken and cumbersome experience of buying razors and blades.
Ultimately, a new mindset is critical to making a Service shift. It’s about ensuring ultimate customer satisfaction, living up to your promises, and taking away as much of the customer’s work as possible. It’s all about focusing on helping them get the job done – not putting your product is no longer at the forefront of your business model.
Don’t miss the next article in the series, covering the Stakeholder shift. See how companies like Unilever, BlackRock, TOMS Shoes, and many others are navigating the future.