They’re talking about a convenience revolution

The success of car-sharing firm Streetcar shows how consumers are increasingly using services as an alternative to buying products

Is it worthwhile owning a car in today’s congested, parking-hell conurbations? One company that’s capitalising on car owners’ growing frustration with city motoring is Streetcar – a firm that offers users access to a car near to them for just 5 an hour.

Streetcar is pretty small right now. It has 7,000 members. But on current growth rates, founder Andrew Valentine is confident that in another five years it will boast 100,000 members in London alone.

Using Streetcar costs around a third of the cost of actually owning a car and saves you all the hassle of parking, insurance and maintenance, Valentine argues. About a quarter of its members have given up owning cars; many use its services in lieu of buying a second one.

Streetcar is intriguing on two counts. First, it’s effectively a new type of business model: a consumer asset-sharing network. If you commute to work on public transport in a big city, the asset utilisation of your car is terrifyingly low. Car sharing boosts asset utilisation while divvying up the cost. Valentine promises further launches along the same lines in future.

Second, Streetcar is turning a product into a service. Not just the odd taxi ride but an ongoing relationship with a service provider who issues monthly bills; a service that renders car companies’ efforts to sell cars to consumers irrelevant.

Sure, at Streetcar’s current size it’s not striking terror into the hearts of GM and Ford. But it illustrates an accelerating trend.

For decades, one of the driving obsessions of marketing was how to “productise” things. It was all about how to embed value into a thing that could be sold in a transaction. The Hoover productised dusting. The washing machine productised the back-breaking task of laundry. The gramophone record productised music performances. To create mass markets, you needed products that were saleable.

But over recent decades, we’ve seen a move in the opposite direction. The fast food companies “service-ised” food products. Starbucks “service-ised” coffee. Internet applications are service-ising software products. Big American retailers like Best Buy are selling services like the Geek Squad to help you sort out technicalities that are flummoxing you (the idea is now coming to the UK). And there are signs that this country’s extended love affair with DIY is morphing into a renewed desire to outsource work to tradesmen who can do it much better than us and save us an awful lot of time to boot.

product mindset Behind this to-ing and fro-ing lies a deeper marketing rethink. For 100 years marketing has been mesmerised by “the product”: a tangible item into which we embed value, and which we then sell by closing a transaction. Marketers have effectively focused on two questions: “what value to embed into the product?” (the challenges of innovation, differentiation and so on), and “how to make the sale?” (marketing communications, channel strategies and so on).

As we all know, services don’t fit this mould of embedded value and discrete transactions. Many services are delivered via many repeated interactions experienced over time. Yet, despite these obvious differences, somehow marketers have found it extremely difficult to think outside the product box.

Why didn’t Nestl?r Kraft create Starbucks? Arguably, because they couldn’t help but see coffee as a thing that is processed in factories and sold in shops. Why are the mobile phone companies in such a mess over churn? Because, despite endless rhetoric about lifetime value, when push comes to shove their marketing practices are driven by a transaction focus – closing the sale.

So here’s the rethink. Perhaps the product mindset was “wrong” all along. Perhaps all value boils down to a service offered by one person to another. And perhaps, as academics Stephen Vargo and Robert Lusch recently argued in an influential article, products are just one of many possible “distribution mechanisms for services”. Products are only a means to the end of a desired outcome. As Streetcar demonstrates, what matters is the end result, not ownership of a thing.

shift in perspective Rethinking value like this can be a liberation. Take innovation. The product mindset defines the innovation challenge in terms of “value we can embed into things we can sell” whereas the service mindset sees innovation in terms of “relationships we can build by reconfiguring customer processes to help them achieve desired outcomes while saving time, trouble and/or money”. Sometimes a product may be the best way to do this reconfiguring job, sometimes not. But the core issue remains the same: the service outcome. Is this just an angels-on-pinheads debate? Not according to Stockholm Business School Professor Ewert Gummesson who told a symposium of consumer goods industry leaders and leading academics last week that, thanks to this shift in perspective, “we are heading for a breakthrough in customer centricity”.

One aspect of this breakthrough is consumer process redesign. Borrowing from the approach used by Toyota in its car-making, Professor Daniel Jones of the UK’s Lean Academy has been mapping, in painstaking detail, each of the steps – on both sides of the user/provider fence – required to achieve desired outcomes such as a repaired car, a completed shopping trip or a hospital procedure. Seeing the complete picture in the round routinely reveals astonishing amounts of wasted time and effort.

One hospital procedure took 31 weeks from start to finish, even though the time actually spent treating the patient was 100 minutes (with an extra 900 minutes’ work needed by the patient and the hospital to make this treatment possible). If a grocery shopper buys 200 stock keeping units (SKUs) from a store offering 20,000 SKUs, that means she’s accessing just 1% of the value offered – and spending most of her shopping time sifting through the 99% she doesn’t want.

One Portuguese car dealer reconfigured its internal and customer contact processes in line with lean principles and reduced the time spent by customers on getting the service done by 50%, the cost of actually doing the job by 50% and the overall time spent by 70%.

Thanks to 100 years of intense focus on products, we now have a world full of excellent products and “broken” consumption processes, Jones told the symposium. “And wherever something wastes the consumer’s time, it invariably wastes the provider’s time too.” A “new convenience revolution” is in the offing, he predicts, as leading companies look to redesign the way they provide, and consumers access, services.

Streetcar might just be the beginning of something big.

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