Applying Service Thinking for Innovation
If you do not change direction, you may end up where you are heading.
—Lao Tzu
The dynamic interactions of Service Thinking foundation concepts can lead to revolutionary industry and enterprise disruptions. We can map how such transformations might take place, all the while retaining the strategic humility to recognize that ultimate outcomes are emergent and not subject to prediction.
Can You Imagine the Unimaginable?
We can look backwards and see how value was co-created and co-evolved with social Internet technology to facilitate the emergence of user-generated communities such as Facebook. Can we imagine the future to envision what is not yet here, in a field in which the technology has arrived, but the processes of co-evolution and co-elevation are yet to be developed?
Let’s look at 3D printing. According to Wikipedia, this recent technology facilitates the individual manufacture of three-dimensional solid objects from a digital model.1 It makes hardware out of software; it renders the tangible from the intangible. 3D printing can produce jewelry and art, dental devices, automobile parts, tools, and many more items. People paid attention when the makers of the successful 2012 James Bond movie “Skyfall” hired a 3D printing supplier to make 3D replica 1965 Aston Martin DB5’s, suitable for strafing with machine gun fire and blowing up without damaging the original.2 The technology has proven functional.
How will 3D printing emerge from its current status as a specialist/hobbyist novelty to achieve the “third industrial revolution” that some are predicting for it? Let us trace the virtuous circle.
Value Co-Creation
One entry point for 3D printing is co-creation. Much of the early development and exploration has taken place within the free and open source software space. Because of this relatively open license environment, it has been easy for hobbyists to share designs and ideas, and it is easy for them to invent new variants of 3D printers. The hobbyist and early adopter community can collaboratively advance the technology and its applications. And significant progress has been made into value creation in business. For example, special parts can be designed and rapidly manufactured through 3D printing, such as hinges and other components for kitchen cupboards and fixtures, and custom shaped parts for the assembly of planes and cars. The designer supplies a digital specification for the part, and the 3D printing software translates this into machine instructions, and the new part is co-created. The evolutionary direction points to a future that is solidly in the center of significant value creation in the global economy.
Componentization
Another stage in service transformation will be the componentization of the architecture for the delivery and consumption of 3D printing service experiences.
How can we build substantial consonance and resonance? 3D printing would have to become as easy for customers as printing on paper. We can easily buy printers from HP, Kyocera, and others, either at retail stores or online. We can download printer drivers if we need to, and we can order ink supplies. It’s easy to replace ink cartridges, and we are alerted when ink is low and seamlessly directed to online ordering, with next day delivery, if we require it. We can buy paper, in sizes that we know will fit industry-standard paper trays. Software that we run on our computers, laptops, smartphones, and tablets can all generate a print command in order to output a printed page. We can choose to buy branded ink cartridges or less expensive unbranded forms that fit into our printers in the same way as the proprietary versions (making the choice to forego the feelings of trust and confidence that come with the brand experience). We can have them delivered via standardized services from UPS or FedEx—just check the appropriate box and the details are all taken care of. If we don’t want to print in our own offices, we can send the print instructions to FedEx Office or another external specialized printing capability.
These standardized interfaces and well-established protocols illustrate the componentization of the printing industry. There is a value web of component manufacturing resources to make parts for assembly into printers of varying capabilities, customizable from standard parts into a printing service that fits individual customer needs. There are standard formulas for ink and paper so that we can rely upon the performance of these components of the printing experience. Software interfaces are intuitive; when we pull down the “File” menu and choose “Print,” we can be confident of the outcome (and we can easily change the settings if we choose to). Reliable componentized code has been developed for these functions, with the IP protected in such a way as to make usage widely available. Delivery components, courtesy of specialists such as UPS and FedEx, are integrated into the organization of the printing ecosystem.
This componentization of 3D printing has not yet evolved, but it is on its way. STL file formats are becoming a universal standard and can interface with CAD and modeling software. The colors and performance standards for the printing “inks” are evolving, so that output can be standardized and be capable of meeting expectations without excessive variability. There is not yet a Kyocera or an HP of 3D printers, but one will emerge when the industry size becomes big enough to attract these standardizing firms. There is no established destination on the web to go to in order to browse a list of available designs for printed components like hinges and brackets or plastic panels; perhaps amazon.com will provide this service, or maybe an industrial cataloguer like Grainger. The printers themselves have not yet evolved to the point where they become “plug and play” on any network, attachable to a standard MacBook or Dell laptop, and accessible from Lion OS or Windows 8, or via a downloadable app from the App Store.
Componentization will lower costs and increase the speed of adoption of the technology. It will enable big players like HP to decide whether or not to add the appropriate capabilities to enter the 3D printing industry, and to integrate with parts suppliers and channels of distribution.
Glo-Mo-So
3D printing will be plugged into an appropriate Glo-Mo-So platform. Ordering printers and parts, exchange of CAD designs and files, click-to-print on Macs, and Windows-based devices will all be seamlessly enabled. Diffusion will accelerate. Apps will be designed, written and offered to simplify access to and use of the 3D printing process. Printing hubs will probably emerge first (such as specially equipped FedEx Office locations or even more complex 3D printing specialist shops) but eventually, 3D printers will proliferate on the edges of private and public networks, just like paper printers.
Here is an example of how Glo-Mo-So and componentization have already inspired new businesses unimaginable before.
Makerbot Doll houses made through 3D printing from CAD produced design sets from Kacie Hulgren a theatre set designer: http://www.makerbot.com/blog/2012/04/23/mbtv-s02e08-scenic-design/
Service Systems
The 3D printing service system will take shape. Value-in-use has been established. However, value-in-experience is not yet substantially developed. 3D printing does not yet easily fit in to current service systems (i.e., has not established consonance) and has not yet demonstrated how it can be employed to co-create massive amounts of new value for a large number of people and entities (i.e., has not established resonance).
From the Makerbot Doll Houses using 3D printing illustrated above, let’s consider a more traditional offering in the same toy industry, Thomas the Tank Engine, to illustrate how legacy brands could be transformed with Service Thinking using 3D printing and other adjacent possibilities.
Case Example: Thomas the Tank Engine Opportunity Using Service Thinking
Let us speculate, for example, that a toy company, observing the emergence of a componentized capability supported by Glo-Mo-So platform standards, and possibly collecting data about the gifting of 3D printers among early adopter communities, makes the decision to integrate 3D printing into the service system of “child’s play.” We could imagine, for example, that one of our childhood favorite toy characters, Thomas The Tank Engine, enters the world of 3D printing. It would be perfectly in character, since Thomas already embraces printed books, a TV show, CDs, apps, web content, games, clothing, and accessories, as well as toys ranging from individual engines to play sets for assembly.
What if the Thomas brand were to offer parents of young children who have already entered the Thomas franchise the opportunity to extend and deepen the Thomas experience by 3D printing new engines, new pieces of track, and new accessories like engine sheds and tunnels? Mattel (the owner of the Thomas brand) could market a piece of CAD software or an app to its current owners and community members, downloadable to a laptop computer or smartphone. The customer would pay for the app and, with a suitable standard interface for customizing and personalizing colors and characterization (via a list of choices within the software), 3D print the items in their own home, and plug the printed items into their existing play-sets. Perhaps a Mattel approved integrated partner would supply the “inks.” If the customer did not already own a 3D printer, Mattel would refer them to another preferred partner in the ecosystem.
Now a service system has emerged on both the provider and customer sides of co-creation. The provider’s system includes integrated specialists aligned around the provider goal of extending and strengthening the Thomas brand franchise and delivering an innovative customer brand experience, expanding a trust that has already been built. On the customer side of the service system, consonance results from the established propensity for the Thomas brand to extend into contemporary forms of experience. Resonance results from an integration of a totally new way of parents and children experiencing the pleasure of being a Thomas fan. The social sharing that takes place among children will rapidly validate the new function and expanded benefits of the brand. Parental connections will result in them sharing new adaptations and experiments with the Thomas 3D printing experience, and new bursts of co-creation and new forms of value-in-use will occur. Value-in-experience becomes established; in our example, the experience is an established one of the parent–child experience of play, a context with a valuable global marketplace.
Now, both the 3D printer companies (like HP in our hypothetical example) and the experience designers (like Mattel in our even more hypothetical example) can look to their R-T-I ratios and decide whether and how to allocate more resources to the transformation and innovation of the customer experience, in the context of the emerging demand for 3D printing experiences. Adding 3D printers to the HP offering and a 3D printing experience to the Thomas brand offering required an “I” form of resource allocation. Both companies will have found places in their portfolio of expenditures and activities to squeeze some resources out of “R” budgets in order to facilitate the new offerings and will be incented by the market to continue with the transformation.
They will be aided in making these resource allocation decisions by their analytics and KPIs. The multisided metrics for HP will measure the behaviors of customers in ordering new printers and “inks”, and their usage levels—infrequent and occasional or regular and increasing. On the sentiment side, are they expressing satisfaction with the experience? Are they advocating to others? Is the blogosphere sentiment positive or negative? Are there reviews on Yelp? Has Amazon.com become a major online destination for the purchase of printers and accessories and materials? How does the 3D printing category compare with the paper-printing category? Is Walmart in the service system yet?
For Mattel, there will be the metrics of unit sales, of course, but also whether or not this form of innovation reinforces the Thomas brand image. On the scale of “most loved by children,” has this new feature moved the score upwards? Are children socially sharing the experience with peers, and are parents doing so with other parents? Are new co-created ideas being discussed in Thomas forums? Are the early signals that characterize the pathway to broad adoption found in the responses to the new Thomas offering?
This is all pure speculation. But our thought experiment has shown how Service Thinking can, conceivably, identify a robust pathway to a new and profitable field of value creation. In this case, once co-creation in an open source arena gains a foothold, the critical pivot point is whether the industry can componentize, both by establishing new standards and interfaces, and by integrating with componentization that has already taken place in areas like Asian component manufacturing networks and componentized coding of software. Soon afterwards, or perhaps contemporaneously, 3D printing scales and diffuses via a Glo-Mo-So platform, integrating software devices and networks that facilitate global adoption. Then, established service systems start to bring 3D printing into important everyday contexts (we used “Parent–Child Play” as an established experiential context in our hypothetical example). New experiences will also emerge with a new integrated service system—perhaps a new form of collectable art, or printable furniture or buildings. Finally, firms will look to re-balance their R-T-I (Run-Transform-Innovate) resource allocation ratios in order to achieve speed and critical mass in the new emerging service system and will develop the analytics, KPIs and models to shape and direct their investments and stay on the leading edge of a rapidly developing disruption.
We must emphasize nonlinearity. Service Thinking incorporates the capability of observing emergent systems, without being misguided into thinking that they can be predicted and prescribed. Co-linearity of emergent themes is more likely than sequential impact. Service Thinking firms make multiple experiments at multiple points in time and assess the results dynamically within the emerging service system. They adjust and change flexibly and do not get locked in early to irreversible or rigid strategies. They employ component business models to modularize their structures so that they can add and subtract competencies, internalizing some specializations and externalizing others. They carefully monitor customer behavior and sentiment, and can react quickly when patterns change. They measure the profitability that results from their R-T-I governance models and are guided by the light of outcomes.
With Our Thomas the Tank Engine speculation, we simply hope to illustrate how to start to apply the seven concepts of Service Thinking to support ideas for possibilities in the co-creation and rapid scaling of new value and new profits.
Car-as-a-Service
The evolution of the experience of car ownership and car driving in the 21st century is an illustration of the impact of Service Thinking. In 2013, as this is written, the evolution from product to service in the automobile business is well under way and, in fact, is developing in multiple nonlinear directions.
Let us begin with a widely available offering, the Ford Fusion with Sync. Ford Sync3 is an early example of a next generation connected software-driven dashboard or vehicle information and communications system. Ford is enhancing its offering via a platform + services strategy. The car and its manufacturing infrastructure is the platform, and software and communications generate the services. This approach opens up pathways to multiple revenue generation streams based on opening up new customer experience options. For example, the “Wi-Fi hotspot” is available in one service package offering but not in others, allowing auto manufacturers to generate revenues from customers that care about such features without having to manufacture a hardware model. Some services in Sync require a subscription, while others are part of a base package. Vehicle health reports, for instance, which send engine diagnostic information to the Ford portal, are available in base packages. Personalized traffic alerts and satellite radio, on the other hand, require a subscription plan. Lastly, features like HD Radio are available as a “pay per song” model, similar to iTunes.
An auto manufacturer, using such a “platform + services” model, could have limitless possibilities for the design of the new customer experiences. Customers can have the option to pay for navigation maps for a short duration, such as a weekend trip, rather than paying a monthly subscription. Manufacturers can also offer entertainment, such as movies or video games, to rent for a weekend or a long trip. Additionally, manufacturers can offer a vehicle’s maintenance history in the Cloud. This information will stay with the vehicle and can be passed along to a new owner. An example of this is in General Electric’s TRUEngine program which helps GE engine owners “maximize your asset’s marketability and ensure it receives the full range of GE’s world-class support. Through our online TRUEngine database, appraisers and buyers can quickly confirm an engine’s qualification status by Engine Serial Number (ESN).”
Ford has also partnered with an auto insurance provider to track and transmit mileage data, resulting in improved insurance rates for drivers. These creative services provide Ford with experience design opportunities for recurring revenues, in addition to an increase in customer loyalty for not only Ford, but for their entire network, such as their insurance provider partner.
A separate direction for the evolution of car-as-a-service is provided by Zipcar4 and similar companies such as Car2Go in Europe. Zipcar provides cars parked around cities in pods, available on demand to users for a subscription fee. It’s an example an evolutionary service known as shared consumption—using the web and mobile technology to share what used to be products but are now a component of a service platform. The network has become a platform for sharing physical objects, as much as it is a platform for software as a service and Cloud computing.
Zipcar’s car sharing service is still an early market to be sure. Many of the users are in cities and are college students. But according to Frost & Sullivan, the revenue from car sharing programs in North America will increase to $3.3 billion in 2016, up from $253 million in 2009.
Despite the small(ish) size of the car sharing market, the next generation of car sharing startups have already emerged in recent months focused on building car sharing around personal vehicles (owned by people in your community or neighborhood instead of an entity like Zipcar). Think of these new businesses as Zipcar without the large capital overhead.
Cars-as-a-service cuts down on the total number of vehicles on the road and uses individual cars much more efficiently. The Internet—through it’s social network capabilities—is uniquely able to break up the ownership of a good into an efficiently managed service revolving around access. Service efficiently generates more use out of a single good because service values units of experience over units sold.
These two pathways to car-as-a-service will intersect in Google Driverless Cars. These cars integrate a new component into the service system for automobile usage: the service of operating the vehicle for you. Benefits of service will include comfort, safety, and freeing the driver to be more productive during the journey. It is easy to imagine Google Driverless Cars cruising the city, ready to be called up (via a touchscreen interface on a smartphone) to pick up a passenger at any location and take him to any location, with perhaps some auction bidding software for ride sharing.
The overall service system will be enhanced with better highway speeds (more efficiency) and fewer accidents (new value creation) and more integration between highway safety systems and in-car safety systems. All service system elements will require revision including insurance, traffic authority rules, automobile ownership patterns, and many more.
Google Driverless Cars are mobile by definition and can operate anywhere in the world with a sufficient data and technology platform. The technology is social in exchanging information with drivers, other vehicles, and highway, and safety systems, creating the capacity increase and safety enhancements.
These examples indicate that once we start to apply Service Thinking the opportunities for service Innovation appear endless and exciting.