Another View of Smart Services

Take a look at the October issue of Harvard Business Review. There's a great article by Harbor Research founder Glen Allmendinger, and Ralph Lombreglia, vice president. The article, titled "Four Strategies for the Age of Smart Services," (registration required) explains four business models for product companies who want to leverage networking technology to grow service business profits. They are: embedded innovator, solutionist, aggregator and synergist. Whether a strategy fits one category or another depends on where it sits on two scales: 1) how much of the profit the product manufacturer controls (versus controlled by others) and 2) how much profit comes from the product (versus from the networked information the product provides).

"What seems to be missing is a good script that communicates the opportunity to senior management in a compelling way."

The basic idea is that previously "dumb" products like air compressors, diesel engines, and uninterruptible power supplies can now report back to headquarters things like whether a part is wearing out. This avoids downtime for the customer, which is worth paying extra for -- sometimes a lot extra, especially if the product itself is really expensive or if it serves a really critical role. The authors identify dozens of ways companies, or their channel partners, can make money off this kind of information.

While I think most people in technology are aware of the "smart services" concept -- having it mapped out in front of you in such a pristine and granular way is fascinating. The article should be a real help to manufacturing companies looking to figure out how network-enhanced products might enhance their service businesses.

But what I found even more fascinating came at the end where the authors recount their attempts to sell this concept to product company execs -- who aren't buying it! How is that possible? I wonder. The case for smart services seems intuitively obvious and the trend seems absolutely inevitable. It's a classic case of you-either-get-this-or-you-get-left-behind.

"What seems to be missing," the authors say, "is a good script that communicates the opportunity to senior management in a compelling way."

That's not all that's missing. If business customers aren't buying this concept, imagine what it will take to get them to buy any new idea -- which would probably be even less straightforward than this one. That's the challenge most sellers of technology innovation face.

Before you can find great scripts, you first have to find great scriptwriters. Now that would be a really smart service.