We're in an inescapable rush to service dominant economies - if you're not ready and managing this, the future looks bleak. http://solvinnov.com/the-shift-to-the-services-economy/ But, what evidence is there for this shift? How is this shift happening? And are there some real life examples? Well, it's happening for four main reasons: Economic, User Behaviour, Asset Usage and Leveraging Data. And yes, there's plenty of examples.

1. SolvInnov.com
We are Shifting to Service Economies

2. SolvInnov.comSolvInnov.com
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1800 1850 1900 1950 2000 2050
Goods
Agriculture
It is predicted we are shifting to Service Dominant Economies
Services
Adapted from Chesbrough (2013) Open Innovation

3. SolvInnov.comSolvInnov.com
It’s already happening: UK Economy in 2017
1%
6%
14%
79%
Agriculture
Construction
Products
Services
UK Commons Briefing Paper: Components of GDP: Key Economic Indicators, 2019

4. SolvInnov.com
What do we mean by the Shift to Service Economies?

5. SolvInnov.com
Tangible
Dominant
Intabgible
Dominant
Complete
tangible
products
Tangible products
with
supporting services
Hybrid
Offers
Major service
with
supporting products
Pure
services
The Shift to Services-dominant Economy
The Shift

6. SolvInnov.com
But why are we Shifting to Service Economies?

7. SolvInnov.com
Reasons for the Shift to Services-dominant Economy
Economic
Asset Usage
Leverage Data
User Behaviour

8. SolvInnov.com
Reasons for the Shift to Services-dominant Economy
Hierarchy of Needs
De-industrialisation
Exogenous Demand Shock
Cost Disease
Changing Notion of
ownership
Using underutilised assets
Data
Increases in wealth => higher desire to use and usage of services
Manufacturing moves abroad + trade => Services increase to fill gap in economy
Structural changes in economy, e.g. from households with 1 to 2 breadwinners
=> increase service demand
Productivity increase in manufacturing leads to wage increases in manufacturing;
which leads to wage increases in services => increase desire to work in services
Less desire to own products => increase opportunities for services
Opportunities to share underutilised assets => growth of sharing economy (which
is service oriented)
Getting data beyond number of sales, such as usage, is very valuable
EconomicAsset
Differentiating products Adding services to products helps differentiate the offering
Leve
rage
Data
UserBehaviour

9. SolvInnov.com
The Shift to Service Economies
Passive Hypotheses Active Hypotheses
Cost Disease Hypothesis
Increased productivity and wages in
manufacturing sector leads to increased service
costs (attracting people to, and growth in, the
service segment)
Baumol (1967) and Baumol et al. (1985)
Hierarchy of Needs Hypothesis
As incomes grow in advanced economies so does
the need for services
Fisher (1935) and Clark (1940)
De-industrialisation Hypothesis
Service sector grows in advanced economies as
manufacturing is moved to lower cost locations
and trade takes place
(Wood 1995, Freeman 1995)
Exogenous Demand Shock Hypothesis
Structural changes in an economy moves the
services demand curve outwards; e.g. one-
income households becoming two-income
households...leads to reduced time to do things
themselves and greater need for services.
(Raa and Wolff 1996, Fixler and Siegel 1999)
Source: Kim (2006)

10. SolvInnov.com
Any examples showing this?

11. SolvInnov.com
Examples of the Shift to Services-dominant Economy
Hierarchy of Needs
De-industrialisation
Exogenous Demand Shock
Cost Disease
Changing Notion of ownership
Using underutilised assets
Data
EconomicReasonsAssetReasons
✅
Cook at Home
Eat out
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Sales
Differentiating products
✅
Eat out
✅
✅
✅
✅
🚘
✅
✅
✅
✅
✅
✅
Vacuum Robot
Vacuum Robot
As a service

12. SolvInnov.comSolvInnov.com
Product Service
The Shift...