Struggling to Make the Shift to Solutions: Write Your Own Obituary

It is clear that organisations across the globe are making the shift to solutions. Often the ultimate aspiration is providing the outcomes the customers (and in some some cases the customer's customers) want and need. Often this journey is described in terms of a service ladder - gradually moving from providing products to supporting the products with spares; through to remote or condition based monitoring; and finally onto contracting for capability or outcomes. While a logical flow and an inherently attractive proposition, successfully making this shift to solutions in reality is challenging. A critical issue is winning the hearts and minds of people who are used to a world of products. If you've always worked in a product or technology centred business then a commonly heard fear is "won't services cannibalise the product business" or put more directly "aren't we sowing the seeds of our own destruction - we'll kill the product business if we are too good at offering solutions".

Hearts and minds are always difficult to win, but one useful trick is to play on this fear. Recently we have been experimenting with asking organisation's to write their own obituary. The exam question we set is "write or record a short obituary for our services business. Imagine we are five years down the road and we haven't made our services business work (while all of our competitors have). What would the press be saying about us? What would they put our failure down to? Who would get the inheritance (e.g. which competitor gets our business and why)".

A simple trick, but the responses that are generated are both illuminating and in some cases humbling. Senior executives start to verbalise ideas like "ACME Inc has divested all of its remote and condition monitoring efforts and sold them to Monitoring-R-Us, a private company specialising in industrial solutions". Five themes consistently shine through these obituaries - the failure of the organisation concerned to keep pace with change; the inability to break away from the product-dominant culture; the need to get closer to customers and really understand their businesses; the reluctance to make the necessary investment - dabbling rather than committing to services and solutions; and missing the opportunity that the era of big data and sensors offers. In another blog I'll try to write more about these issues, but in the short-term if they strike a chord with you, join us in Cambridge on 1st October for the Cambridge Service Alliance conference - "Successfully Making the Shift to Solutions" - where we'll hear from organisations that are making the shift and overcoming the barriers. 

How Companies Learn Your Secrets: The Power and Pitfalls of Analytics

One of the most popular stories in last week’s New York Times was provocatively entitled – how companies learn your secrets. Drawing on material for a new book by author and journalist, Charles Duhigg, the article explores behavioural science and analytics in retailing. The highlight of the article is the story of a father who comes to a Target store complaining that Target is sending his high-school daughter vouchers for discounts on baby products. “Why are you sending my daughter these vouchers”, he screams. “Are you trying to encourage her to get pregnant”? A few days later the father calls the store manager to apologise – it turns out his teenage daughter is pregnant after all, she just hadn’t got round to telling her father yet!

How did Target get to know that the girl was pregnant before she’d even told her dad? Simple, through customer analytics – by looking at people’s shopping habits Target and many other retailers can make intimate predictions about people’s lives. Start buying lots of meals for one and the retailers will assume a relationship breakup. Stop buying eggs and the store might assume you’ve got your own chickens! Pregnancy is particularly important because it is such a major life change that it brings many other opportunities for the store. Most of us are creatures of habit. We buy the same toothpaste, soap and deodorant year after year – simply through habit. Research suggests that pregnancy is one of the best times to break old habits and form new ones. Target’s research suggests that an increase in sales of unscented lotions and vitamins is linked to pregnancy. Couple these two facts and the implications are profound. Target can predict who is and who is not pregnant, send those who are likely to be pregnant coupons and vouchers to use and try - in the process - to create new shopping habits for individual customers.

This brave new world, where big brother is watching, offers opportunities, but there are also significant risks for the organisations involved. Privacy concerns and reputational damage can be significant. Just look at the comments on the New York Times article – there are a lot people who are worried about the power of analytics and the potential for abuse of the data. Clearly organisations can see the benefits of analytics, but they also have to weight up the risks and put in place some very carefully considered governance mechanisms to avoid headlines like “how companies learn your secrets”.

Andy Neely and Ed Barrows