— by Luis Alt and Mauricio Manhaes
Should you lead your company to a transition from products to services? Is “servitization” right for you? Is your digital offer a product even though it produces no tangible objects at all? If everything is a service, what is the relation between products and services? Our aim is to give you a clear view of the role they (should) play by the end of this article. Let’s get going!
Services are not the opposite of products
Companies and consultants use the expression “products and services” when they want to refer to all possible market offers. It not only creates a questionable divide between these two words; it puts services as a complement to products. At any business school, you learn that there are core service providers and companies that are selling tangible things. Software companies on one side and third-party business-to-business PC-components manufacturers on the other. Schools and blackboard industries. Hair salons and shampoo brands. You got the point, right?
Confusion arises when Google, a software company, shows on its corporative webpage its “products”. There, the focus is not on physical objects in the likes of their smart glass, car or phone. Instead, you can learn about Gmail, Photos, and many other digital solutions they currently offer. Barclays, the English bank that sells no objects, has its offers of “products and services” on its website. Products are the actual bank account, access to credit, investment options, insurance and so on. Services are the supporting structure that allows you to use the bank’s service. Finally, in Silicon Valley’s enchanted universe, there’s the trendy role of the Product Designer. This professional is in charge of the vision for a digital product. Every company and startup is hiring one right now.
But weren’t product designers responsible for tangible objects we call products? What happened to their physical elements in the digital era?
The origin of design and products
As our need to produce things at scale grew, Design as a discipline arose. One can argue about artisans being designers, as someone who creates something that detaches from the ordinary. Amongst the first designers were probably the ones creating packages to protect foods in commercial routes, iron-stamping cattle in the fields, or diagramming books for the brand new press. The problem is neither of them called themselves designers. Design, as we know, emerged when the need to plan and determine how industrial, tangible, things should come into existence. And so came the Industrial or Product Designer with a handful of tools.
As industries evolved and made their offers available on the market, products are what they called them. Since the definition of product is “any tangible or intangible good or service that is a result of a process,” it fits. Its origin, though, resides in mathematics where it stands for the outcome of an operation. In Latin producere means to bring forth. And even though we came to associate products with tangible objects, no rule states it should.
Terms like “servitization” and “from products to services” suggest that industries should look at their goods as services and change their transaction model. Although many people use goods instead of products, the fact is most people in business associate products exclusively with tangible goods. But saying “products and services” is the same as saying “humans and women” or “humans and men.” Although it is not completely wrong, we should not see it as a technically correct affirmation. Beyond reasonable doubts, the concepts of ‘women’ and ‘men’ are part of ‘humans’ the same way the concepts of ‘goods’ and ‘services’ are part of ‘product.’ Thus, the right way to refer to that offer bundle would be “products (goods and services)” or just “goods and services.”
A product is a variable number of goods and/or services bundled together as a value proposition offer.
Your company might have many value propositions (services) combined differently as an offer to clients with specific conditions (products). Service is the medium through which we propose value while a product is an offer in itself. As presented by the illustration below, one company can have many services and goods, while offering many products. It may have a complex combination of several goods and services (Product A), one product with lots of services embedded (Product B), one unique service offered as a product (Product C), or the same services offered in different products (Products D, E, F, and G). Nowadays, given the service-dominant understanding of products, it would be difficult to find a company that offers a product as “pure” goods (Product ?). A “pure” goods product could not provide any kind of embedded logistics, warranty, choice or configuration. The goods themselves could not provide any service to its buyer. A difficult condition to meet.
Organizations should have a clear understanding of their services and how they bundle them together as products. Service Design might be the only discipline available that is capable of making sense of user’s needs and desires, organizations capabilities and business contexts and turn it all that into valuable propositions.
Supported by Service-Dominant Logic (SDL) growing acceptance, we know that every company is a service company. Either it is aware of it or not. The fact that some companies do not consider themselves as providing services does not change the fact that they are. But as explained above, and as strange as it might sound, every company is also a product company. The danger of not perceiving it the right way is to create a dissonance between clients desires and the products we offer them which, given the current speed and fluidity of markets, is simply not acceptable.
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We believe this new approach to the way we look at products and services have the potential to bridge the current market practice with Service-Dominant Logic’s proposal. We are still evolving on this concept so that any comment would be very much appreciated.
Thanks, Luis and Mauricio.
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Click here if you want to read our intro to the Service-Dominant Logic.
