It’s not about product or service anymore

Most industries seem to have a weak epiphany realizing that it’s maybe not about the product anymore, but service is important. And trendy topics such as the experience (or value) economy bloom right and left. Should hotel chains invest in Hospitality as a Service? Or, ain’t that all very old news?

products - innovation copilots

It’s not about product or service anymore. It never was. Since the beginning of times, every transaction has always been both a product and a service. But you might be confused because finance is still looking hard at Capex versus Opex and that’s fair. Tax people might also still lag behind and account for VAT, investment, and transfer of ownership in different ways, but why would that mean that your customers should care?

I very often go back to this 1941 ad from Sears:

Don’t sell me clothes. Sell me neat appearance, style attractiveness.

Don’t sell me shoes. Sell me foot comfort and the pleasure of walking in the open air.

Don’t sell me candy. Sell me happiness and pleasure of taste.

Don’t sell me furniture. Sell me a home that has comfort, cleanliness, and convenience.

Don’t sell me books. Sell me pleasant hours and the profit of knowledge.

Don’t sell me toys. Sell me playthings to make my children happy.

Don’t sell me tools. Sell me the pleasure and profit of making fine things.

Don’t sell me refrigerators. Sell me the health and better flavor of fresh foods.

Don’t sell me tires. Sell me freedom from worry and low cost per mile.

Don’t sell me plows. Sell me green fields of waving wheat.

Don’t sell me things. Sell me ideas, feelings, self-respect, home life, happiness.

Please don’t sell me things.

So yes, no breakthrough MIT-grade business research here. Just the common sense that is lacking 98% of businesses. In that regard, every startup or industry feeling smart about trying to invent Something as a Service™ should think again.

You thought that because you were struggling at selling cars, jumping in Mobility as a Service will help you get back in the market? It won’t. You were struggling because you were actually just selling cars; cars as the product. Not the product and the service. Or, to be fair you were selling the service more and more, but as an extra layer above, below, or beside your shining product itself. And then to be sure to cover all your bases, you were also investing extra efforts in your brand; because it seemed like another extra thing to do.

If Sears doesn’t convince you, just go back read Schumpeter again: the added value is transferred to the market through a product.

The product is not the end goal of any transaction; it’s only the vehicle of it. Or, as I often admittedly prefer to point: the product is just a feature of your business model. As such, the price is not defined by your cost of production, the quality of your product, or even its novelty. If we want to be mildly optimistic about it, the product is only one of the many contributors to the price. What you actually transfer to the customer as a benefit is what drives the core of your pricing strategy. And your price can only be sustainably above the competition when you drive significative extra benefits in the customer zone.

Again, you might be confused because you’re thinking about your marketing mix.

Should your top of the line, middle-class urban sedan go electric and have MiFi to connect with millennials? Maybe. Maybe not. Before even touching that, how are you managing the fact that you compete with Uber, bikes and hoverboards, buses, Skype and local Starbucks? You don’t, don’t you? This doesn’t fit your intricate marketing matrixes? Well, good luck trying to hold the door for as long as possible…

it's not about product or service - innovation copilots

We know of course how big is the chasm between intellectually understanding such principles as “there is no difference between product and service” while you read a blog post, and really using them in a business-as-usual way.

As we saw, this “breakthrough” idea is not a breakthrough at all. It’s old; even ancient from the perspective of a web startup. But every company struggles to reconnect with it in different ways. Sometimes it’s a matter of a few hours seminar, sometimes it’s months of coaching, training, and consulting. And for sure, customer-driven companies have a better time coping with this principle. It’s already in their DNA. More process-driven or future-driven companies have to get on board differently — but not by changing their DNA, which always proves impossible and would be a rooky mistake.

In any case, the first step is very often the same: learn at every level of your company to differentiate the product from the added value, from the market’s problem.

And move up from there…

Author: Philippe

Philippe has been training 200-300 startups a year since 2007, consulted for dozens of multinationals on rupture innovation or corporate incubation, and was directly involved in more than 150 startups building their market fit and scaling up their business. He also teaches business model innovation in key MBA programs whether they are in Paris or Shanghai. And since 2017, Philippe is now living in Amsterdam, one of the best European business hub around.