Strategy

Why you need to turn your Product into a Service

By May 20, 2018

 

What would happen to your business if your competitors suddenly started giving away their products for free? Do you have a plan of how you would deal with this scenario?

Or would you just lurch on and hope that your loyal customers would reject the offer of free products and stick with the products you demand upfront payment for?

Don’t think that this won’t happen to your industry because what you do is ‘unique’ or ‘expensive’ or the barriers to entry are high.

The fact is that this is already happening in all manner of unexpected sectors, and the pace of change is accelerating.

The most obvious example of a costly product transitioning to a fee paying service, is Software As A Service (Saas). The purchase of a major piece of software or hardware seems laughable now but it’s not so long ago that companies did just that. They spent tens or hundreds of thousands of euro on systems and servers when all they really needed were the benefits those systems and servers delivered.

But along came Salesforce, which ran an enormously successful campaign and annihilated the product-for-sale market.

Instead of spending hard earned cash on software licences and installing it on the company hardware in your own datacentre, Salesforce burned the industry to the ground by introducing the notion of running software on the Salesforce servers, and selling subscriptions. That notion has now because standard practice and the idea eventually came to be called ‘the cloud’.

And service creep is now reaching its tentacles into other industries.

To date much of these services have mostly been a product-service hybrid, with the iPod the perfect example. Apple created an amazing product which people were willing to pay for – and they were also willing to continue to pay small sums via iTunes to access and download music.

But even the behemoth that is Apple has been the victim of evolution with Spotify stealing it’s march. Suddenly you no longer need an iPod when just a phone – of any brand – or desktop, will do. With Spotify you can use an existing product and simply pay a subscription for any amount of music you can listen to.

Still confident your industry can’t or won’t be disrupted? Are you sure?

At UrbanVolt we are seeing it happen before our eyes – because we are helping cause that disruption via our Light as a Service.

There are few major modern industries around as long as the light bulb industry. From Thomas Edison’s first invention, it went through many improvements and spawned the fortunes of now global companies such as GE and Phillips. They invested billions in building factories to bring raw products through a complex process and have the light bulb emerge at the other side.

And then Light Emitting Diodes (LEDs) came along. The light bulb industry wasn’t wiped out overnight but the vast improvements in the technology and the plummeting cost, means that factories the world over are now closing. And even GE, the company founded by Edison, is selling off GE Lighting.

It is doing this for two reasons. One is that LEDs have become the product of choice in the same way the iPod became the product of choice over the walkman and discman.

And now LEDs have taken a seismic leap forward and are transforming from a product into a service in the same way Spotify has brought music to the next level.

Light as a Service has cut dead the sale of lighting products because businesses are asking why would they buy lights when all they really need is light? Instead of paying tens or hundreds of thousands on a depreciating asset, Light as a Service gives companies the benefit of the product – ie, light – without having to take on the cost and risk of purchasing them.

And soon the Light as a Service model will be applied to other energy efficiency products. Why buy solar panels if someone is willing to offer a service which will help you capture the sun’s energy, and will merely charge you a service fee?

Even long established companies such as BMW have conceded that change is inevitable and are embracing the service model for their cars.

Now imagine the same service model being applied to your industry. Can you imagine the opportunity it would bring?