Raising the design game to succeed in Outcome Based Services

The idea of a separation between Product & Service Design in the world of “outcome based services” is out-dated and limiting. In an age where digitization has blurred the boundaries between products and services, a new paradigm is emerging for delivering outcomes. Companies that see service based business models as a key component of their growth strategy must re-think how they innovate and develop these integrated product-service solutions. The idea of design is no longer a term that is used to describe the technical or software delivery of a product as typified by the scope of Design Engineering. It must transcend the aesthetics and usability often seen as the realm of Product Design. It must also include Service Design capabilities that are leading the focus on Customer Experience often using the Design Thinking process. In fact Design must rise above all these disciplines and be the glue that brings together all the different aspects of the solution to deliver a coherent outcome and experience to the customer. This means design becoming the mechanism that drives collaboration and facilitation within the organisation to harness all the stakeholders and capabilities to deliver on a customer’s expectation. Even for companies leading the development of outcome-based services this is a change in thinking. However it is just one of the key mind-set changes that must be achieved if businesses are to successfully shift from products to services. Most businesses are not yet at this level of maturity, so are far from achieving their full potential.

The Historical context

50 years ago most companies that made stuff had a product focus sometimes known by academics as Goods Dominant logic, in which tangible products were sold. Now more and more business are moving to delivering outcomes under a Service Dominant logic approach. The change is profound! This journey, which many call servitization, starts with product focused companies, where value is viewed as being embedded within goods and exchanged at the point of delivery. To transform to a service focused business their mind-set must change to view value as being co-created with customers in their context of use, which implies the adoption of a customer-centric approach to innovation and business development. One of the most well documented examples is that within the aerospace engine business, where both GE and Rolls Royce no longer sell jet engines. Their business model has moved on to selling power as an outcome. This has involved a fundamental rethink in all aspects of their business, including engineering, organisational footprint, cash flow and culture.

The concept of ‘Design’ must also be part of this transformation. After all, if these new business models are to be successful, the integrated solutions that comprise of products and services must deliver on their promise both in terms of customer experience as well as value. So it is very logical that the design, innovation and deployment processes must evolve in parallel. Historically, this evolution can be seen in 3 phases:

1. Service as cost: Product focused companies used to view Service as an added value to the manufactured product. The concept of design was compartmentalized into different capabilities within the business, such as software, engineering or product. Users were seen as having limited involvement in the product creation process.
2. Service as a business: Services started to be perceived as a market offer and a potential driver of growth and service design became an important competency in the delivery of propositions. Increasing co-creation of solutions occurred, as users were perceived as experts of their own experiences and contribute to the innovation process.
3. Seamless Customer Experience: many businesses are shifting to outcome based services, which are seen as a business model in terms of a business logic, way of thinking and innovating. Users actively engage in co-creating solutions. Design is now applied as an approach to support organizations to think and innovate in a human-centred way to achieve a seamless customer experience.

The drivers of change

This maturing in business models started with the digitization of many technologies that has blurred the distinction between products and services. Coupled with an economic environment in which technology and products are becoming ever faster commoditized, many companies now see services as a market offer. The spread of the internet and development of big data analytics technologies have further increased the pace of this transformation as companies seek to monetize their data and knowhow.

Society is also changing in terms of how it works and its complexity. The internet and through it social media has encouraged a much more collaborative way of thinking. This has flowed through to businesses using ecosystems of collaborators to solve complex technology challenges that they cannot deliver themselves.

This means that innovation now comes from a much wider set of stakeholders, which has spawned a more democratized approach to idea generation, in which new ideas come from a wide variety of sources from within the business, the customers, the supply chain and ecosystem of partners.

All these drivers make for a much more inter-dependent world between stakeholders, requiring new ways of working.

How well positioned are businesses to manage the shift to outcome based service models?

There are very few businesses that naturally have developed the mind-set or capabilities to move to outcome based business models. In order to be able to develop compelling and profitable propositions, it is a journey that a whole organisation must take. Most organisations have yet to shift their mind-set to a world where design is seen as an overall approach to aligning stakeholders to work together towards this new paradigm. In trying to highlight to business leaders the changing role of design, the ISSIP User Experience SIG developed a questionnaire that examined the strategy shift from products to services in parallel to the level of engagement with stakeholders in the proposition development process. This questionnaire is a discussion document, designed to help highlight differing views on strategy and design within an organisation, and covers four key areas:

1. Service: Understand how people describe the company in terms of the role service plays in its growth model, what service means in the business and who is involved

2. Design: Explores how the organisation views design, what role does it play and who is involved in designing service propositions

3. Users: Who are the users, how does the company interact with its users and how involved are they in the innovation process of the business.

4. Vision: What is the Vision for service innovation within the business, why is it changing and how much support is there for transformation.

If done across many people, departments and stakeholders, this analysis can be used to identify strategic weaknesses in how the organization is driving towards its vision for achieving a seamless customer experience.

The analysis sheds light on four fundamental questions against the context of a businesses position on the Product-Service-Continuum.

1. How well aligned is the leadership behind the vision

Under Vision, the questionnaire and discussion aim to understand, what is the current mission for the business, where do the business leaders want to go and how well aligned is the leadership team with this direction. In itself, the strength of this alignment and vision will be a key factor in any transformation.

2. Does the organization’s definition of Service match its ambition?

Understanding how a company views service in relation to its growth strategy provides clues as to how radically it must change its mind-set. For example a common problem faced by some organisations is that they may suddenly decide they want to deliver outcome-based services, yet they have traditionally viewed service as a cost centre. These are the businesses that fail in their growth plans, because the change of mind-set is too large to be made in their required timescales.

3. Are customers co-creators of service or pure consumers

Understanding how a company interacts with its customers will also provide clues to its readiness to profitably deliver outcome-based services. Leading business, whether they be product or service focused, nearly always have a high level of interaction with their customers through the design & deployment process. This culture of co-creation becomes ever more critical to success, as companies shift towards delivering outcomes.

4. How holistic does the organisation view design

It’s ok for Product companies to focus on engineering and product design. But as soon as they start the shift from products to services, it is essential to bring service design expertise into the process. Indeed as the focus shifts to delivering a customer experience, so we expect design to manage the process of integrating the product and service into a seamless customer experience.

Misalignment between any of these strategic questions indicates a weakness in mindset and organization, which will very likely inhibit the business goals to be met.

Case Study

This methodology was used to understand the coherence of thinking in one of the leading suppliers of networking technologies, often cited as a leader in the shift from products to services. Even in a business that has a mature transformation program, the difference in mangers understanding as to where the company is within this paradigm shift, its vision and the role of design to support this shift was surprising. This is a very large organisation and perhaps some silo thinking sways the results in that the left hand is not quite aligned with the right. However it is an organisation that has invested significantly in a transformation program, yet it still has significant challenges to overcome. Imagine the potential disconnect in organizations just starting the transformation journey!

The designers of this tool who will be presenting their initial results at the ServDes 2016 conference in a paper ‘Moving towards Service Dominant Logic in Manufacturing Sector’ have begun investigations into other businesses. As more businesses start their journey towards outcome based services and customer success models, those businesses that can overcome this challenge, will clearly gain competitive advantage through designing propositions that can deliver greater value, because all elements of the proposition have been integrated into a coherent solution.

Concluding thoughts: In this new age of collaboration and inter-dependence between partners, companies will not be successful in shifting to a service orientation without a significant change in their approach to design. Up to now the role of design in this new culture has been largely overlooked, yet in many ways it lies at the heart of the Product to Service Shift. Companies, who are seemingly advanced in the shift to services, are still entrenched in the traditional roles of design. Businesses are either confused about what design is  in their companies, or they are very fixed in their definitions. This can only hold them back from developing a truly holistic approach to developing outcome-based propositions. These types of propositions need to deliver a consistent customer experience, through a service delivery organization designed to deliver the required quality at the optimum life-cycle cost. To do this effectively, the service solution must be designed in to the product by the software and hardware engineering teams. This is not a one-off event, but an on-going processes requiring stimulation and a form of holistic oversight, especially if it is delivered through an ecosystem of partners. Most companies in our experience have yet to get anywhere near this level of maturity. Product designers believe their work is key to success and build services into products from this ‘Inside-out’ perspective. Service designers take a much more ‘Outside-in ‘ approach, but place less emphasis on how service is designed into the core product offering. In truth both approaches must work as one, which is why companies need to move into this new 3^rd phase in the evolution of how we think about service design.

Members of the ISSIP UX Group who contributed to this article are:

• Lead Author: Nick Frank, Co-Founder Si2Partners, Service Transformation Consultancy
• Daniela Sangiorgi, Associate Professor, Dipartimento di Design, Politecnico di Milano
• Don Allen, Ph.D., Business Operations Manager, TS APJ & GC Head Office, Cisco Systems, Inc.
• Jung-Joo Lee, Assistant Professor, School of Design and Environment , National University of Singapore (Design for Service Innovation, User Experience Design)
• Leslie Tom , Chief Sustainability Officer , Charles H. Wright Museum of African American History
• Deniz Sayar , Doctoral researcher, Istanbul Technical University
• Valorie Valencia, Founder & CEO , Stellar Research
• Filipe Lima , Doctoral researcher, Politecnico di Milano

Nick Frank is Managing Partner at Si2 Partners, a consultancy helping clients leverage services to win in industrial markets

Further articles on this and other topics can be found in the Si2 Partners Resources Page and the Si2 Knowledge Center

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