A central theme in the new book Service Innovation is that “All Products are Service” and that all businesses accordingly should focus on the value-creation and experience of users.
Over 80% of the US economy is service by traditional measures, but increasingly goods are being sold on the basis of ad-on service such Onstar or extended warranties for cars. Servicization actually converts goods into service by providing the benefit of the good not selling the good: airlines pay for hours of thrust for their vehicles instead of buying jet engines; consumers join monthly mobile phone plans that include keeping phones current. All product ARE service.
A recent post by Elke Stangl, a physicist and small businessperson in Austria, notes the phenomena “Everything as a Service” and argues that servicization bodes ill for small businesspeople.
Certainly when a customer commits to a service for an extended period or entrust another firm to effectively own assets for them, the image of financial stability or size may matter. Even more fundamentally Ms. Stangl raises the issue of the “winner take all” effect popularized by Nassim Taleb in the Black Swan. Due effective communication, globalization, network effects, and scale, services on the Internet seem to quickly have one or a small group of big winners with all other providers instantly marginalized.
Do you agree that “all products are service” or “everything as service” inherently favors large companies? Leads to a small group of winners?
How can small businesses adapt to servicization?
- Here is a link to the book Service Innovation on Amazon.
- The link to the article “Everything as Service” by Elke Stangl
- My Amazon Author Page.
ProfessorGary on Innovation and Marketing 
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Thanks for the link – I am frantically updating my post now as I tried to be balanced in the main text and only mentioned the negative stuff in the comments 🙂
I think people are looking more for a POV than balance… Thank you! I am behind on “service” posts and you inspired me for two quick ones!!
Now trying to answer your question 😉 …
I believe you can survive artisan-style if you try to offer really bespoke and tailor-made services (I mean REALLY, I know everybody says that about their services). In the comments on my post I argued that I feel small businesses will be in one of these categories: Doing standardized stuff as a large vendor’s subcontractor, franchisee or the like (following the ‘vendor’s code of conduct’ etc.) or by, say, hand-crafting luxurious items and offering services of the type people brag with like ‘I can afford to hire …’ (say: famous personal trainer X, when everybody else uses the fitness app on the smartphone.)
And maybe tailor the tangible/intangilble mix for users?
Sort of, but I think it needs to be a bit more special than ‘clicking together stuff in the cloud configurator’ – I imagine there will be resellers / partners who bundle all the different things I mentioned in the post, like cloud storage and phone and bank accounts… But I wonder if and when such intermediaries get replaced by software that helps the clients bundling and managing all on their own.
“Optimal Ownership” algorithm and app!
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