Creating Growth with Service

Article #12: Creating Growth With Service

This article is based around the fact that companies that are faced with saturation of their core product markets are turning to services when searching for ways to grow. Companies that have had success with this strategy are GE, IBM, Siemen's AG, and Hewlett- Packard Co., for example.

A certain approach in creating services-led growth can help managers of product companies improve the odds of success. Companies need to define their markets by looking at customer activity and outcomes instead of products and services. Relating a map of customer-activity to a service-opportunity matrix, managers can explore opportunities for new services in 4 directions. Managers also need to assess pitfalls and risks that these opportunities represent.

Peter Drucker has pointed out, "What the customer buys and considers value is never a product. It is always a utility-that is, what a product does for him." There are particular outcomes that customers seek, and they participate in certain activities to achieve them. Such activities can be mapped on customer-activity chains, which have the following characteristics:

-Represents an end-to-end temporal sequence of logically related activities.

-Leads to defined customer outcomes.

-Must be defined at the segment level, not at the aggregate market level.

-Often crosses industry and product market boundaries.

This chain is the foundation for exploring services-led growth opportunities.

With the Service-Opportunity Matrix, companies can classify new services along two dimensions: the focus of growth and where it occurs and the type of growth and how it occurs. Then there are 4 types of framework:

-Temporal Expansion: an activity chain that can be though of in terms of time-the time it takes a customer to perform all the various tasks he or she needs to reach a specific outcome.

-Spatial Expansion: While temporally inked services deepen relationships with customers, spatially linked services broaden them.

-Temporal Reconfiguration: Opportunities for temporal reconfiguration arise on the primary activity chain. Companies do not add new services in this part of the matrix;