The document discusses trends driving the shift from goods-based to service-based economies. Technology and connectivity, consumer demographics and expectations, and information economics are causing more developed countries' labor forces and GDP to increasingly come from services rather than goods. Innovation in services focuses more on customer experience, business models, and value networks than product features. Success requires finding underserved areas, compelling customer experiences, and embedding services using information and communications technologies.
Digital Transformation in the PLM domain - distrib.pdf
Trends in Service Innovation
1. Trends and Patterns in Service Innovation Jeneanne Rae, CEO, Motiv Strategies May 13, 2010
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6. These Trends Have Caused a Macroeconomic Shift to Occur … US and EU Economic Output Services Goods * * Tipping point was 1987
7. … and New Tools Are Emerging to Adapt to this Shift US and EU Economic Output Services Goods Transformative Business Disciplines 1 Six Sigma Note 1: Peer Insight analysis Note 2: “A Whole New Mind,” by Dan Pink (2005) Abundance Asia Automation Quality Reengineering Innovation
8. Services Are Becoming Dominant in All Developed Countries Ten Nations Total 50% of World Wide Labor A = Agriculture, G = Goods, S = Services 1980–2005 PC Age 2005 The Largest Labor Force Migration in Human History Is Underway, Driven by Global Communications, Business and Technology Growth, Urbanization and Low Cost Labor Source: International Labor Organization US Employment History and Trends *Source: “Service Research to Improve/Innovate Service Systems,” Jim Spohrer, Director, Almanden Service Research, IBM Corporation, April 2, 2008 (A) Agriculture: Value from harvesting nature (G) Goods: Value from making products (S) Services: Value from enhancing the capabilities of things (customizing, distributing, etc.) and interactions between things Nation Labor% A % G % S % Service Growth China 21.0 50 15 35 191% India 17.0 60 17 23 28% U.S. 4.8 3 27 70 21% Indonesia 3.9 45 16 39 35% Brazil 3.0 23 24 53 20% Russia 2.5 12 23 65 38% Japan 2.4 5 25 70 40% Nigeria 2.2 70 10 20 30% Bangladesh 2.2 63 11 26 30% Germany 1.4 3 33 64 44%
9. Look How Fast Services Are Growing in China Source: International Labor Organization Adapted from: Service Research to Improve/Innovate Service Systems, Jim Spohrer, Director, Almaden Service Research April 2nd, 2008 1980-2005 PC Age 2005 Source: International Labor Organization China Employment History and Trends (A) Agriculture: Value from harvesting nature (G) Goods: Value from making products (S) Services: Value from enhancing the capabilities of things (customizing, distributing, etc.) and interactions between things Ten Nations Total 50% of World Wide Labor (2005) A = Agriculture, G = Goods, S = Services Nation Labor% A % G % S % Service Growth China 21.0 50 15 35 191% India 17.0 60 17 23 28% U.S. 4.8 3 27 70 21% Indonesia 3.9 45 16 39 35% Brazil 3.0 23 24 53 20% Russia 2.5 12 23 65 38% Japan 2.4 5 25 70 40% Nigeria 2.2 70 10 20 30% Bangladesh 2.2 63 11 26 30% Germany 1.4 3 33 64 44%
10. Simple Quote Style “ Any product that is not closely associated with a service today, will be in 10 years… … Today we only fund devices that are connected to services. ” — Kevin Fong Managing Director Mayfield Fund
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13. B to B “Solutions” Are Replacing Discrete HW/SW/Service Models Aerospace Computer Hardware Healthcare Climate Control
14. Technology Is Enabling New Solutions, New Customer Experiences, and New Business Models Source: The Internet Economy 25 Years After .Com, Transforming Commerce and Life. The Information Technology and Innovation Foundation, March 2010 Internet-Enabled or Empowered Biz Model Definition Example Companies E-Delivery Uses IT to undercut business models based on physical delivery Fractional Ownership Uses the Web to enable fractional ownership or capital assets, with the Internet enabling scheduling in time increments not previously practical Marketing of Excess Capacity Business models, often leveraging ICT, that identify and sell unused capacity Dynamic Pricing Adjusts prices online in real-time in response to fluctuating supply or demand variables Auction or Matching Markets Leveraging the Aggregation of Supply and Demand Markets Aggregates consumer demand and supply for products or services in one location, allocating supply and demand through auctions or matching Create a New, Web-Based Platform for Commerce Uses the Internet to create an entirely new platform for commerce, monetized by inviting third parties to participate through it Outsourcing and Cloud Computing Company assumes complexity, capacity, or hosts services on behalf of client Software-as-a-Service Enterprise-application software that customers do not have to license, but can access online over the Internet
15. Technology Is Enabling New Solutions, New Customer Experiences, and New Business Models Source: The Internet Economy 25 Years After .Com, Transforming Commerce and Life. The Information Technology and Innovation Foundation, March 2010 Internet-Enabled or Empowered Biz Model Definition Example Companies Pay-per-Use Plans On-demand or per-pay-use services “ Trip Sense” Program Information-Based, Targeted Offers Uses data mining to develop targeted offers or services Mass Customization Uses ICT systems to introduce “mass produced, yet customized,” also known as mass customized” services Anytime Services Internet enables always on availability of services Ad-Supported Search, Content, and Services Free content or search services for Web users supported by paid business advertising Social Media/Social Marketplaces Create a meeting place for people, enabling transactions Referral-Based Models Receive a fee each time a sale is made through the referring Web site
17. There Are 10 Types of Innovation 1 Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Note 1: “Ten Types of Innovation”, by Larry Keeley/Doblin Inc. (1999)
18. There Are 10 Types of Innovation 1 Assembled Capabilities that Enable Innovation Proprietary Processes that Add Value (Including ICT) Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Note 1: “Ten Types of Innovation”, by Larry Keeley/Doblin Inc. (1999)
19. There Are 10 Types of Innovation 1 Assembled Capabilities that Enable Innovation Proprietary Processes that Add Value (Including ICT) Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Note 1: “Ten Types of Innovation”, by Larry Keeley/Doblin Inc. (1999) Basic Features, Performance, and Functionality Extended System that Surrounds an Offering How you service your customers
20. There Are 10 Types of Innovation 1 Assembled Capabilities that Enable Innovation Proprietary Processes that Add Value (Including ICT) Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Note 1: “Ten Types of Innovation”, by Larry Keeley/Doblin Inc. (1999) Basic Features, Performance, and Functionality Extended System that Surrounds an Offering How you service your customers How You Connect Your Offerings to Your Customers How You Express Your Offering ’s Benefit to Customers How You Create an Overall Experience for Customers
21. There Are 10 Types of Innovation 1 Assembled Capabilities that Enable Innovation Proprietary Processes that Add Value (Including ICT) Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Note 1: “Ten Types of Innovation”, by Larry Keeley/Doblin Inc. (1999) How the Enterprise Makes Money Enterprise Structure and Value Chain Basic Features, Performance, and Functionality Extended System that Surrounds an Offering How you service your customers How You Connect Your Offerings to Your Customers How You Express Your Offering ’s Benefit to Customers How You Create an Overall Experience for Customers Inside-out
22. There Are 10 Types of Innovation 1 Assembled Capabilities that Enable Innovation Proprietary Processes that Add Value (Including ICT) Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Note 1: “Ten Types of Innovation”, by Larry Keeley/Doblin Inc. (1999) How the Enterprise Makes Money Enterprise Structure and Value Chain Basic Features, Performance, and Functionality Extended System that Surrounds an Offering How you service your customers How You Connect Your Offerings to Your Customers How You Express Your Offering ’s Benefit to Customers How You Create an Overall Experience for Customers Outside-in Inside-out
23. Consider How the Jet Engine Market Engaged in “Feature Warfare” During the Early 1990s Minimal/ None Some Activity Moderate Activity Frequent Activity Non-Stop Activity Business Model Finance Value Network Channel Delivery Brand Customer Experience Offering Core Process Process Enabling Process Product/Service Performance Product System Customer Service Source: Peer Insight analysis
24. Consider How the Jet Engine Market Engaged in “Feature Warfare” During the Early 1990s Business Model Finance Value Network Channel Delivery Brand Customer Experience Offering Core Process Process Enabling Process Product/Service Performance Product System Customer Service Source: Peer Insight analysis Minimal/ None Some Activity Moderate Activity Frequent Activity Non-Stop Activity JIT Delivery Depot Repair Staged Spares Thrust-to-Weight Ratio Modular Design (LRUs)
25. Consider How the Jet Engine Market Engaged in “Feature Warfare” During the Early 1990s Business Model Finance Value Network Channel Delivery Brand Customer Experience Offering Core Process Process Enabling Process Product/Service Performance Product System Customer Service Source: Peer Insight analysis Minimal/ None Some Activity Moderate Activity Frequent Activity Non-Stop Activity JIT Delivery Depot Repair Staged Spares Thrust-to-Weight Ratio Modular Design (LRUs) Six Sigma 5-Axis Machining
26. Consider How the Jet Engine Market Engaged in “Feature Warfare” During the Early 1990s Business Model Finance Value Network Channel Delivery Brand Customer Experience Offering Core Process Process Enabling Process Product/Service Performance Product System Customer Service Source: Peer Insight analysis Minimal/ None Some Activity Moderate Activity Frequent Activity Non-Stop Activity JIT Delivery Depot Repair Staged Spares Thrust-to-Weight Ratio Modular Design (LRUs) Six Sigma 5-Axis Machining
27. Consider How the Jet Engine Market Engaged in “Feature Warfare” During the Early 1990s Business Model Finance Value Network Channel Delivery Brand Customer Experience Offering Core Process Process Enabling Process Product/Service Performance Product System Customer Service Source: Peer Insight analysis Minimal/ None Some Activity Moderate Activity Frequent Activity Non-Stop Activity JIT Delivery Depot Repair Staged Spares Thrust-to-Weight Ratio Modular Design (LRUs) Six Sigma 5-Axis Machining Most Competitive Activity in the Jet Engine Industry Was Focused Here
28. Where Is the “White Space?” Business Model Finance Value Network Channel Delivery Brand Customer Experience Offering Core Process Process Enabling Process Product/Service Performance Product System Customer Service Source: Peer Insight analysis Minimal/ None Some Activity Moderate Activity Frequent Activity Non-Stop Activity JIT Delivery Depot Repair Staged Spares Thrust-to-Weight Ratio Modular Design (LRUs) Six Sigma 5-Axis Machining
29. GE Power Became #1 by Leasing Jet Engines to Airlines, Getting Paid Only for Uptime… in Effect, They Sell “Guaranteed Thrust” Business Model Finance Value Network Channel Delivery Brand Customer Experience Offering Core Process Process Enabling Process Product/Service Performance Product System Customer Service Your most trusted source for aircraft thrust Procure and repair competitor engines, too Lease any jet engine If engine is down, you don ’t pay Source: Peer Insight analysis Minimal/ None Some Activity Moderate Activity Frequent Activity Non-Stop Activity JIT Delivery Depot Repair Staged Spares Thrust-to-Weight Ratio Modular Design (LRUs) Six Sigma 5-Axis Machining
30. Volume of Innovation Efforts in the Goods Era (1990 ’s) Hi Lo Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Goods Source: Doblin analysis (1989-1999)
31. Comparing the Goods Era to the Services Era Hi Lo Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Goods Goods in Front 1 Volume of Innovation Efforts: Source: Doblin analysis (1989-1999) Note 1: “Ten types of Innovation”, by Larry Keeley/Doblin Inc. (1999) Note 2: 111 Service Innovation Projects Researched by Peer Insight (2003-2007)
32. Comparing the Goods Era to the Services Era Hi Lo Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Goods … Services in Back 2 Goods in Front 1 Volume of Innovation Efforts: Source: Doblin analysis (1989-1999) Note 1: “Ten types of Innovation”, by Larry Keeley/Doblin Inc. (1999) Note 2: 111 Service Innovation Projects Researched by Peer Insight (2003-2007) Services A B C D
33. Formula for Success in the Services Era Hi Lo Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Services Source: Doblin analysis (1989-1999) Note 1: “Ten types of Innovation”, by Larry Keeley/Doblin Inc. (1999) Note 2: 111 Service Innovation Projects Researched by Peer Insight (2003-2007)
34. Formula for Success in the Services Era Hi Lo Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Services Source: Doblin analysis (1989-1999) Note 1: “Ten types of Innovation”, by Larry Keeley/Doblin Inc. (1999) Note 2: 111 Service Innovation Projects Researched by Peer Insight (2003-2007) 1. Find the White Space
35. Formula for Success in the Services Era Hi Lo Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Services Source: Doblin analysis (1989-1999) Note 1: “Ten types of Innovation”, by Larry Keeley/Doblin Inc. (1999) Note 2: 111 Service Innovation Projects Researched by Peer Insight (2003-2007) 1. Find the White Space 2. Create a Compelling cX and Business Model
36. Formula for Success in the Services Era Hi Lo Customer Experience Core Process Enabling Process Product/Service Performance Service System Customer Service Channel Brand Business Model Value Network Offering Process Delivery Finance Services Source: Doblin analysis (1989-1999) Note 1: “Ten types of Innovation”, by Larry Keeley/Doblin Inc. (1999) Note 2: 111 Service Innovation Projects Researched by Peer Insight (2003-2007) 1. Find the White Space 3. Embed It Using ICT 2. Create a Compelling cX and Business Model
37. How Do We Define Services ? They Are Dominated by Intangibles Tangible-Dominant Solutions Intangible-Dominant Solutions Goods Services Customers Want Outcomes, or “Solutions” … and compelling solutions mix tangible and Intangible Elements 1 Note 1: Lynn Shostack, “Breaking Free From Product Marketing,” Journal of Marketing, 44 (April 1977).
43. Patterns for Customer Experience Elements in innovative offerings Source: Peer Insight analysis for Tekes, the Finnish Agency for Technology and Innovation, 2007 Report available at www.tekes.fileng/publications/innovative-service.pdf Managing Complexity
44. Patterns for Customer Experience Elements in innovative offerings Source: Peer Insight analysis for Tekes, the Finnish Agency for Technology and Innovation, 2007 Report available at www.tekes.fileng/publications/innovative-service.pdf Managing Complexity Minimizing Uncertainty
45. Patterns for Customer Experience Elements in innovative offerings Source: Peer Insight analysis for Tekes, the Finnish Agency for Technology and Innovation, 2007 Report available at www.tekes.fileng/publications/innovative-service.pdf Managing Complexity Minimizing Uncertainty Increasing Productivity
46. Patterns for Customer Experience Elements in innovative offerings Source: Peer Insight analysis for Tekes, the Finnish Agency for Technology and Innovation, 2007 Report available at www.tekes.fileng/publications/innovative-service.pdf Managing Complexity Minimizing Uncertainty Fostering Transparency Increasing Productivity
47. Patterns for Customer Experience Elements in Innovative Offerings Source: Peer Insight analysis for Tekes, the Finnish Agency for Technology and Innovation, 2007 Report available at www.tekes.fileng/publications/innovative-service.pdf Managing Complexity Creating Stickiness Minimizing Uncertainty Fostering Transparency Increasing Productivity
51. Boeing Has Focused on How to Make Its Customers More Successful at Running Their Airlines than Simply Flying Their Planes Airplane Health Management Maintenance and Engineering Management Maintenance Performance
52. Intimate Knowledge of End Users Needs Provides the Inspiration for State of the Art Design Elements for Passengers and Crew Alike State of the Art Cockpit Design for Pilot Safety and Usability Cabin Comforts for Passengers and Crew Alike
58. Thank you! Jeneanne Rae jrae @motivstrategies. com www .motivstrategies. com 703-778-1051
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Editor's Notes
Observation: Service sector is where the job growth is, not only in the US but around the world. Implication: Most science and engineering and management jobs will be in the service sector. For example, Kenneth Smith of H.B.Maynard (one of the oldest and most prestigious industrial engineering consulting firms) said - “Historically, most of our business at H.B. Maynard was manufacturing, today roughly 80% is in the retail sector…” So why do we still train most scientist and engineers for manufacturing age jobs? Could this be part of the reason that in most US engineering schools only 50% of entering engineering students graduate with an engineering degree? The service sector is the fastest growing segment of global economies. In the US, in 1800 90% of people were worked on farms, and today less than 3% of workers are employed in agriculture. Goods, or manufacturing of physical products, peaked in the US in the mid-1950 ’s and has been decreasing ever since due to automation and off shoring. However, services, especially complex information and business services, as we will see is where the growth is. But the growth in the service sector jobs is not just in the developed countries, it is also happening in the developing countries. In fact, the International Labor Organization, reports that 2006 was the first time in human history that more people worker in the service sector than in agriculture world wide. 40% in service sector, 39.7% in agriculture, and 21.3% in manufacturing, with the growth coming by moving people from agriculture to services – this represents the largest labor force migration in human history.
Observation: Service sector is where the job growth is, not only in the US but around the world. Implication: Most science and engineering and management jobs will be in the service sector. For example, Kenneth Smith of H.B.Maynard (one of the oldest and most prestigious industrial engineering consulting firms) said - “Historically, most of our business at H.B. Maynard was manufacturing, today roughly 80% is in the retail sector…” So why do we still train most scientist and engineers for manufacturing age jobs? Could this be part of the reason that in most US engineering schools only 50% of entering engineering students graduate with an engineering degree? The service sector is the fastest growing segment of global economies. In the US, in 1800 90% of people were worked on farms, and today less than 3% of workers are employed in agriculture. Goods, or manufacturing of physical products, peaked in the US in the mid-1950 ’s and has been decreasing ever since due to automation and off shoring. However, services, especially complex information and business services, as we will see is where the growth is. But the growth in the service sector jobs is not just in the developed countries, it is also happening in the developing countries. In fact, the International Labor Organization, reports that 2006 was the first time in human history that more people worker in the service sector than in agriculture world wide. 40% in service sector, 39.7% in agriculture, and 21.3% in manufacturing, with the growth coming by moving people from agriculture to services – this represents the largest labor force migration in human history.
We ’re talking about Boeing’s relationship with its airline clients
Targeted Sales Familiarity allows for richer understanding of appropriate future product/service deals Maintenance Performance MyBoeingFleet.com has personalized toolsets to monitor operator maintenance and repair data 24/7. Airplane Health Management. Monitors health of an airplane in flight to relay that information to airline personnel on the ground. Maintenance and Engineering Management. Continuous data stream from airplanes is fed into data modeling which allows dynamic planning of maintenance tasks to optimize efficiency and keep airplanes in the air.