Expansion of Service Economy is About More Than Business and Personal Services

Most literature on the expansion of the service economy asserts, correctly, that the primary source of economic activity in the U.S. has shifted from manufactured products to services (a shift as significant as the previous shift from agriculture to manufactured products).  However, analysis of that shift tends to focus on business services (IBM and GE used to be product companies, now most of their revenues comes from business services) and personal services (hospitality, food, your morning mocha latte).

But what about services that are replacing products?  This seems to me to be the next major area of growth in the service economy (and to the authors of Cradle-to-Cradle and Natural Capitalism).  These product-replacing services result in:

(1) Happier customers (see Natural Capitalism quote at bottom of post)

(2) Less pushing (er, advertising) of manufactured products with their long life cycles

(3) Less waste in manufacturing processes (fewer steps that are unrelated to customer benefits, like packaging CDs) resulting in higher profits

(4) Less consumption of energy in manufacturing processes, with the related environmental and national security benefits

Examples?  The music industry used to view music videos as advertising for their products: records, tapes and CDs.  Now, CNET reports, "Some argue one of the music industry's biggest mistakes was giving videos away to MTV nearly 30 years ago".  Why?  Because Universal Music - the largest label - is on track to bring in $100 million dollars in ad revenue from its YouTube channel.   YouTube, which now accounts for over 25% of Google searches (YouTube now gets more searches than Yahoo), is thus enabling the servitization of the music industry. 

SaaS is another servitization of a product.  But the examples go beyond published work like music and software.  There are more and more examples of old economy product companies that are retooling in order to provide their products as services.  Take carpet.  Did it ever occur to you that replacing carpet  is extremely wasteful and generally unnecessary?  Why do we replace all the carpet in a room (which requires moving all the furniture out of the room) when only the highly trafficked areas need to be replaced?  Flor is a modular carpet company that provides carpet modules (it looks like an unbroken carpet when installed), and replaces individual modules as a service when they need replacing.  They dispose of (and increasily reuse) the modules as well.  Wanna change your carpet color?  No problem!  Flor will come out and change the modules that are visible while you're on your lunch break.  The company's Sr VP, Jim Hartzfeld, told the authors of that the concept of carpet as a service emerged when they sought "new ways of directly satisfying customers' needs rather than finding new ways of selling what we wanted to make."  The Ernst & Young Center for Business Innovation comments in Natural Capitalism, "When you're dealing with the same customers with that frequency, doesn't it begin to qualify as a service business?"  The Natural Capitalism authors sum this new movement up as follows:

Instead of selling the customer a product that you hope she'll be able to use to derive the service she really wants, provide her the service directly at the rate and in the manner in which she desires it, deliver it as efficiently as possible, share as much of the resulting savings as you must to compete, and pocket the rest.

Comments

[Officerpattern]

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[down neue kennenlernen recently]

How can start this work please tell me
Anyway, what do you think about unemployment?