It has been almost a year since I had the the opportunity to talk at the DScoop Grandmasters Summit. The Grandmasters Summit is a yearly conference where the leaders of the print industry meet. An important theme during the conference was service innovation. Service innovation is getting a lot of attention lately in the print industry as it could provide a way to escape the ‘commodization trap’ and the daily price discussion.
Everyone in the print industry seems to agree that service innovation is a topic that can’t be ignored. The general consensus though is that service innovation is not moving as fast as it should. Based on what I’ve experienced during the Grandmasters Summit I’ll try to reflect on four major challenges that are slowing down the progress of service innovation in the print industry.
1. Don’t let heritage slow you down
A lot of companies in the print industry have a long and rich history. This history is definitely a valuable thing to cherish but it’s also a thing that can be hard to deal with when trying to innovate and make progress. Just think about assets like existing staff with very specific skills, large investments in machines and an established customer base that has expectations of what you do and do not deliver. These assets don’t provide the best environment for innovation to flourish. The heritage of a company is often a strong force that slows down new, potentially disruptive, developments. A strong heritage can cause companies to miss out on opportunities to innovate.
To succeed at service innovation companies need to let go of the idea that heritage limits the capability to innovate. Of course this is easier said than done. Especially when your current business model is relies on this heritage. Heritage should be treated as an enabler to design new innovative propositions.
Start small and get rid of the current targets
What would be your business model if you would have the chance to run a startup in the print industry tomorrow? I used this exact question to challenge people at the DScoop conference to think about the future of their business. The goal for them was to imagine a startup that buys all its production facilities from their current print company. Just like it currently buys ink, paper and machines from other suppliers. This questions provoked a lot of reactions and really helped people to see new opportunities. People adopted a mindset where the current business forms the foundation on which they can build a new startup.
The challenge in this particular case is that startups start small. It can be hard to think small when you’ve just spend a lot of money on the latest digital press. When you’re pursuing service innovation heritage is not the only thing you need to let go of. You also have to let go and rethink the current business targets. Targets like the return on investment time for your digital press. These targets do not apply in your new startup. Service innovation starts small and needs to grow in a company with a dominant heritage. By adopting the mindset of a startup you start think about opportunities without being limited by the targets of the current business.
Moving temporarily to a different location is a great way to create some distance between you and the heritage of your company. An inspiring example of this is The Garage by Microsoft. The Garage is a place where people work around the clock to design new products and services. The great thing about The Garage is that people are encouraged to start small and without limits.
2. The end of the finished product
Over 20 million square meters. That was the amount of paper that was processed. Every single year. Such large scale units are an indication of a market that is dominated by finished products and everyone is doing their best to optimize the production process. A typical thing that happens in these markets is that sooner or later online marketplaces arise making it easy for consumers to easily compare the prices different providers. Being able to see and compare prices instantaneously makes a market more transparent. The net effect usually is that it also puts more pressure on companies to further compete on the lowest price. Something that is welcomed from a customer point of view because it pushes companies to show their added value if they are not the cheapest.
These markets in which the language is dominated by large scale units and finished products is also represented in the direct communication with customers. A great example of this is a price list that only shows the cost per printed page. Such a price list makes it very hard for customers to recognize the added value. Customers seeking the most basic form of service, in this case putting ink on paper, will be very pleased with such a price list. Everyone else that is looking and willing to pay for additional services like faster handling or custom finishing will be stuck with price per unit.
Adopt a human oriented language
Interactions, relationships and experiences are some of the keywords when you talk about services. These human oriented keywords form a strong contrast to the large scale units that currently dominate the language. Companies that put effort into service innovation must recognize that they need to learn a new language. A language where there is less talk about finished products and more about why people would need the finished product in the first place.
The first step in this language transition is to take a step back and look at the worries your products take away from customers. A conversation between a service provider and his customer might sound something like this “we’re going to help you create the most appealing outdoor banner in the city” instead of “the price of an outdoor banner is X euro per square meter”. The reality is that a lot of print companies already provide services but because they don’t communicate in that way with their customers price remains the main differentiating factor. A deep and profound understanding of what your customers do with your product is the only way to deliver added value.
Hilti is known as a company that makes premium quality construction tools. Beside designing and selling products Hilti also houses a service unit. An example of the service Hilti provides is “fleet management”. Looking at the fleet management service you’ll notice that Hilti talks about the job a customer wants to accomplish, not which tools he needs. Hilti guarantees that you’ll have the right equipment on the right time. On top of that Hilti also sells you the confidence even when a tool breaks down as they send a replacement on the same day. Hilti is a company that still makes and sells premium products but at the same time is having a different conversation with its customers.
3. Do better things instead of doing things better
In the hallways of the DScoop conference in Budapest there was a lot of talk about the latest features of the next generation digital press. Innovation in the print industry is strongly driven by technology. Throughout the whole conference there were dozen examples of the materials on which you can print, the types of ink you can use and the number of pages you can print per minute. How exciting some of these new features are the core technology doesn’t change. The effect is that everyone keeps competing in the rat race for more features and lower costs.
Design philosopher Don Norman uses the term “meaning driven innovation” and puts it next to “technology driver innovation”. The boundaries in which change takes place stay the same with technology driven innovation. The solutions you find within these boundaries are usually improvements of the things you’re already doing.
Design Thinking facilitates meaning driven innovation
Meaning driven innovation is all about creating new boundaries in which you look for solutions. Conducting research for meaning driven innovation aims to discover new perspectives on what could be valuable for people. One of the big challenge here is that traditional innovation methods put very little emphasis on the creation of a new perspective. They often focus on finding new solutions within known boundaries. Don Norman refers to Design Thinking as an approach to innovation of which the strengths is to broaden boundaries and create new perspectives.
4. Services are more than an add-on to a product
Service is often perceived as a (free) add-on to a product. In a lot of cases service is seen as an additional offering that can’t exist without a product. The truth is that we are indeed surrounded by these type of product oriented services. A characteristic of these type of services is that you usually only need them when something is wrong with your product or for maintenance of your product. Repair and maintenance are typical examples of product oriented services. You will find these services for any kind of product. It doesn’t really matter if the product is a car or a digital press.
Companies that have a business model that is strongly tied to a finished product like the print industry usually struggle to see the potential of a service driven business model. For these companies services are subordinate to the finished product. In these situations the finished product is irreplaceable and the service is optional. This phenomenon where the product dominates the business model is also clearly present in the print industry. One of the underlying causes for this is that, like described before, the existing heritage plays a dominant role in innovation.
Make products facilitate your service
For service innovation to work it’s essential to develop an alternative business models in which products are replaceable and facilitate the delivery of a service. Apple with its AppStore is an example of a hybrid business model in which the combination of a product and service strengthen the proposition. The third type of services are service driven ecosystems. The value in these service driven ecosystems is created by some form of activity and not by the finished product. An example of this service driven business model are “print brokers”. These print brokers provide a service in which they make sure that a project runs smooth without the customer having to worry about who will supply the paper and on which press it should be printed.
A service can be much more than just an addition to a product when you increase the scope of service innovation to also include product-service combinations and service driven ecosystems. Of course you don’t develop and implement a new business model in one day. Especially not in the print industry where the finished product still forms the main source of revenue. Designing a service driven business model is a process that takes time, patience and maybe above all courage. To take the first step in the right direction I challenged my workshop participants in Budapest with a homework assignment. The assignment was to describe how their company would created value if they didn’t produce a finished product but solely delivered a service. What could be your new business model in this case?
Have the courage to explore the unknown
Service innovation is getting a lot of attention lately and rightly so. I’ve explored four major challenges in this post that slow the progress of service innovation. These challenges transcend the print industry and can found in any product oriented industry. To finalize the post I’ll summarize the challenges.
- Heritage brings legacy and often expensive assets that slows down service innovation. Create space for experiments and start small is a good strategy to make progress.
- The finished product plays a central role in the communication with customers. There should be a language transition towards helping customers.
- Innovation in the print industry is strongly driven by technology. There are many opportunities for companies that are able to redefine meaning of the solution they deliver.
- In current business models services are subordinate to the finished product. Service innovation needs new business models in which products are replaceable and facilitate the delivery of a service.
I hope that by now it’s clear that answers to these challenges are not simple or obvious. The current answers merely provide guidance and direction rather than point to a fixed solution that you can implement tomorrow. Although this might sound discouraging the good news is that it’s an open playing field with huge opportunities. It’s a matter of time before more companies realize the potential of service and shake up the industry. Either way my overall conclusion is that we can expect some exciting times ahead!