Wednesday, December 24, 2014

Innovative Services Are A Huge Boon For Startups

Pebble-smartwatch Startups that sell innovative new products seem to get all the attention these days, but services may be the quicker way to larger profits and faster growth. Of course, we all love disruptive new products, like the Pebble Smart Watch and Google Glass, but recent innovative services startups, including Uber for transportation and Airbnb for lodging, have grown much bigger and faster.

If you think about it, services make more sense in this social media age where relationships, personalization, and interaction are king. Services entrepreneurs can more easily capitalize on the trend to treat each customer personally, whether entrepreneurs be interior designers working from home, marketing consultants, or offering Angie’s List to find the best local handyman.

Even many well-known corporate giants, including IBM and GE, have transformed, redefined, and re-invigorated their businesses into services businesses, and are downplaying their traditional product focus. I saw this trend highlighted well in a recent book, “Profiting From Services and Solutions,” by renowned academics Zeithaml, Brown, Bitner, and Salas.

The authors outlined the multitude of services that every company should consider offering, whether they be startups or more mature organizations. Here is just a sampling to give you the idea:

  1. Software as a service (SaaS). Software is one of those entities that can be provided either as a product or a service, so this is where the movement to services started. Charging by the month or user lowers the entry cost, provides a predictable revenue stream to startups, and allow updates to be done transparently. Everybody wins.

  2. Advisory services. This the new name for professional consultants and matchmakers, whether they be for personal fashion design, business marketing, or healthcare. In the corporate world, these services are needed for human resources, process improvements, and transportation routing. The power of relationships and interaction are key.

  3. Value-added services. Every innovative product startup can spawn many services startups to provide utility beyond the basic entitlements. These range from extended warranties, to home delivery and setup, to on-site technical support. In many cases, the revenue from innovative value-added services can exceed that of the base product.

  4. Product sharing services. Not everyone these days wants to manage or count on dedicated vehicles for short rides, or wants to buy movies for a single view. Hence the popularity and wealth of new services like Citi Bike, Lyft, and NetFlix. I’m sure there are many more just waiting to be found.

  5. Process outsourcing services. In businesses, many have found improved efficiencies in outsourcing their payroll, programming, or manufacturing. Now startups are extending this concept into the consumer world with personalized concierge services, gift shopping, and smartphone apps that find the nearest and best restaurant for you.

  6. Smart sensor services. These were once relegated to the realm of sensors built into aircraft engines, but now every consumer device has sensors built in. That means smart refrigerators, home control, and personal health monitoring, all of which need services to provide and interpret the feedback. The opportunities have just begun on this one.

  7. Integrated product-service solutions. When a startup wraps an innovative service around someone else’s product, the result can be a solution with a whole new opportunity. New apps have turned smartphones into everything from flashlights to credit cards to health monitors. GPS devices with the right services now become safety systems that alert parents when their kids get lost, or wander into dangerous areas.

I intentionally left out the traditional entitlement services, which are typically defined as product support, warranties, and maintenance, since these often are expected free with the product purchase, and are more often cost centers to providing companies

So if you are an aspiring entrepreneur, be sure to explore the need for creative services, as well as innovative products, in your next startup. You don’t have to be an engineer, or make a huge investment in hardware, to come up with a winner. Also, you don’t need a huge investment to build a services startup. There is no excuse for not starting today.

Marty Zwilling

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2 comments:

  1. Marty,

    This article was a bit inspiring for me, it confirms my choice in a service based start-up. I have a couple applications I developed and need to get deployed myself to invoke a service base around that client base. I am currently deciding which "category" my services should fall under. Message me if you have time to chat about some options I may have as a young start-up.

    Jason Romero
    The Romero Agency

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    1. Jason, thanks for your positive feedback. Due to my schedule, I won't be able to make a phone connection, but feel free to dialog with me via email at marty@startupprofessionals.com

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