Innovation Opportunity: Turn Products into Services

By: Jeffrey Baumgartner

How can your products be turned into services, and your services re-thought to make them even more comprehensive? This growing area offers many opportunities for innovation, says Jeffrey Baumgartner.

Developed countries’ economies are becoming increasingly service oriented over time. Even items that were once considered products that we bought from shops are becoming more like services.

Take the car, the single biggest product (aside from a house) that most of us will ever buy. Actually, that may not be true any more. Fewer and fewer people are actually buying cars. Here in Belgium, for instance, a large number of cars on the road are leased by companies which in turn provide the cars to their employees. The leases comprise not only the car, but also insurance, regular servicing and even fuel. In exchange, the companies which lease the cars pay a monthly fee to the leasing firm.

Some big cities, however, are taking this one step further. In Paris, London and elsewhere, you can sign up to a car sharing scheme in which you pay a monthly fee. Then, whenever you need a car, you log onto a web site, find a car nearby and order it for a period of time, ranging from an hour to a few days. Once you’ve ordered the car, your membership card acts as a key for that vehicle. For city dwellers who only need a car occasionally and who don’t want to have to deal with the hassles of parking and maintaining a car, this is an ideal scheme.

Or consider the iPhone or Google’s Android operating system for mobile phones. Much of the excitement surrounding these products is not the products themselves, but rather the services you can acquire through the telephones, the so-called “apps” (short for applications). Actually, when you think about it, most mobile telephones are given away or sold for a sneeze in exchange for a service contract with a mobile telephone operator – yet another example of the servicification (my word) of products.

My parents need not own a lawnmower, snow shovel or rake. That’s because they subscribe to a lawn care service that sends someone round regularly to cut the grass, rake the leaves or shovel the snow, depending on the season and weather. For this, they pay a regular subscription. And they are not alone. During the summer, you can see a slew of trucks, belonging to competing services, parked on their road.

Turning your products into services

If you are one of the few people employed by the manufacturing industry or involved in selling products, it is clear that this trend towards selling products in the form of services is likely to continue. Moreover, it has its advantages. For example, it is my understanding that the heavy vehicle industry was less affected by the economic downturn than the passenger car industry largely because many trucks are bought as contracts that include service, maintenance, and so on. As a result, the industry continued to receive steady income from existing contracts during the recession. However, people simply stopped buying cars.

An excellent creative exercise which can lead to some very innovative results is to explore how you might sell your physical products as services. Ask yourself questions, such as: is it possible to sell your product as a subscription that includes related services? Rather than selling your product as a product, could you sell it as a service? If, for instance, your company sells industrial cleaning equipment, might you offer an industrial cleaning service to your clients, rather than just the equipment? Long term contracts would result in more consistent cash-flow and, having your people using your equipment, should provide a steady steam of user feedback that would enable you continuously to improve your equipment, always an innovative thing to do!

Turning your services into more comprehensive services

Very likely your company already offers services. In this case, it is worth asking if you could enhance your services by including products as part of the services. For instance, if you run an IT consultancy supporting small businesses, perhaps you could go one step further and provide computers and software to your customers’ employees, thus freeing them from having to purchase computers themselves. The cost of the computers would be absorbed in the service fee you charge your customers.

The advantages here are not only do you serve your customers better, but you can purchase computers in bulk and by using a limited range of computers from a single manufacturer, you limit the range of computers your employees need to service, simplifying their work and thus making your service more efficient.

If you run a restaurant, why not offer regular meal services to people who live nearby. For a monthly fee, you could deliver meals to neighbours three days a week (for example). This regularises your income and allows you to make more efficient use of your kitchen, without needing to increase the number of tables.

The list goes on. Indeed, there are many opportunities to deliver products as services and to improve your services by adding products in ways that make life easier for your customers (the lawn care service, for instance, alleviates the need for my parents to buy a lot of gardening equipment).

It also often offers you a chance to out-innovate your competitors with relatively little risk. Services seldom require the capital expense of manufacturing equipment, storage or showrooms necessitated by the sale of goods.

So what are you waiting for? Get brainstorming!

By Jeffrey Baumgartner

Main image: products and services from Shutterstock.com