Your customer needs a hole, not a drill

Guess, who is the biggest threat for an airline whose customers are businessmen?

a. Another airline
b. Budget airline
c. Skype

Yes, the answer is C: Skype. Businessmen who used to fly once a week from London to Paris, for example, now only fly once a month. Three other face-to-face meetings are replaced by Skype meetings.

The business landscape are changing rapidly. Your competitors will come from places you never expected. It becomes more important than ever to ask this question to yourself:

What problems am I solving?

The legendary Harvard marketing professor, Theodore Levitt, phrased it this way: “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!

If I needed a hole for some reason, I wouldn’t buy a drill, actually. I would go to TaskRabbit to find other people who can do it for me. Or I would borrow my neighbour’s drill via Streetbank. What’s the point of buying something that I would use once a month, or even less?

This paradigm shift brings us to “Product-Service System” era. Companies no longer provide mere product or mere service; they combine both to serve customers in better ways. Here are three possible ways to implement it:

  • Focus on optimising product usage – the products are still owned by customers, but you provide extra service to give them better experiences. Eg: Xerox PagePack presents a contract that includes ink, paper, regular service and maintenance by Xerox engineers.
  • Focus on usage, not ownership – your customers don’t have to own everything. Just give them access to the product they want, when they need it. Eg: average cars are only moving 5% of the time (the other 95% are sitting in your garage or in parking lots) – it makes perfect sense to do car sharing via Uber, Zipcar, or BlaBlaCar.
  • Focus on result – your customers only pay for the result, and product involvement is optional. TaskRabbit I previously mentioned was one of the examples.

By constantly focusing on the problems instead of the products, you would have a better chance to compete in this ever-changing world.

 


Adapted from: Tukker, A. (2004) ‘Eight types of product–service system: Eight ways to sustainability? Experiences from SusProNet’, Business Strategy and the Environment, 13(4), pp. 246–260. doi: 10.1002/bse.414.

 

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