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Don’t fall asleep at the wheel – what the new service economy means for your industry

R "Ray" Wang
R "Ray" Wang (pronounced WAHNG) is the Principal Analyst, Founder, and Chairman of Silicon Valley based Constellation Research, Inc. He's also the author of the popular business strategy and technology blog "A Software Insider’s Point of View". With viewership in the 10's of millions of page views a year, his blog provides insight into how disruptive technologies and new business models such as digital transformation impact brands, enterprises, and organizations. Wang has held executive roles in product, marketing, strategy, and consulting at companies such as Forrester Research, Oracle, PeopleSoft, Deloitte, Ernst & Young, and Johns Hopkins Hospital.

His best selling book Disrupting Digital Business (2015), published by Harvard Business Review Press provides insights on why 52% of the Fortune 500 have been merged, acquired, gone bankrupt, or fallen off the list since 2000. In fact, this impact of digital disruption is real. However, it’s not the technologies that drive this change. It’s a shift in how new business models are created.

Wang has held executive roles in product, marketing, strategy, and consulting at companies such as Forrester Research, Oracle, PeopleSoft, Deloitte, Ernst & Young, Personify, and Johns Hopkins Hospital. He is a prominent and dynamic keynote speaker and research analyst working with clients on digital, innovation, business model design, engagement strategies, customer experience, matrix commerce, and big data. His Silicon Valley research firm, Constellation Research, Inc., advises Global 2000 companies on the future, business strategy, and disruptive technology adoption. Ray is a regular contributor to Harvard Business Review and well quoted in The Wall Street Journal, Forbes, Bloomberg, CNBC TV, Reuters, IDG News Service, and other global media outlets. Wang has thrice won the prestigious Institute of Industry Analyst Relations (IIAR) Analyst of the Year Award.

In this, the second of three interviews with global influencer, researcher and tech evangelist Ray Wang, he talks about the dangers of driving with your eyes closed when  preparing for the new service economy.



Tech.Rev: First, with AI on everyone’s lips it seems, let us test where AI might play in future services businesses.

Ray Wang: AI is going to change service economies. These AI-driven smart services operate differently, because we’re not just selling a product anymore – we’re actually moving from products to services.


And there will be different service categories, and how they work, and what they offer, will differ. Two examples are prediction services – what we looked at in the past to predict what might happen in the future; and intention-driven services – what we call anticipatory, analytics that assess what may happen next. AI and AI-driven smart services will change and transform the way we look at business models.


Tech.Rev: So how might this evolution take place?

Ray Wang: We’re moving from a world of products to services – and by services economy I don’t just mean  the consulting services or professional services. We are living in what we call a post-sale, on-demand attention economy. Post-sale meaning everything after the sale is now more important. That’s installation. That’s warranty. That’s field service maintenance. Those are things that happen after you buy the product. For example, in Canada, what’s very interesting is we’re seeing an option. If you buy an air conditioner, you don’t buy the product, you basically buy service for years, to keep that air conditioner working.


In the service economy world, what we’re seeing is corporations like Amazon that have done a great job with areas like Prime, cross-selling and upselling recommendations to customers. We’re seeing that with Alibaba and Tencent, especially with their special days. It’s the ability to connect back to a customer, and understand what they need, learn from what they’ve done before, and actually expand and build services beyond those initial interactions.


All these organisations are in a position where they’re not just selling the products. They’re actually selling services


Tech.Rev: If the future economy is a service economy and upselling is built on trust, how important will trust become in the future?

Ray Wang: Great question! When the topic of privacy comes into place, you have to think about how much privacy you’re willing to trade for convenience or you’re willing to trade for security, both of which are examples of services of the future. That is an equation everybody has to get used to. If I give you more information, and you improve my service, and you drive down my cost, but you give me more items, I might buy more from you because it’s convenient. You’ve reduced the friction. If I give you more of my information, and you keep me safe and secure so that I’m not scammed or I don’t get another spam ad, I might be willing to do that. There is a value exchange that’s required when we’re talking about what type of privacy that we give away.


But here is the thing. Privacy is still a fundamental international human right. It’s something you don’t give up.


And in the rush to offer special services, organizations trip over. Overstepping on privacy creates some issues where customers no longer want to transact with you. A classic example is when British Airways thought it would be great to greet their premium customers at the airport like they knew them when they walked in. It scared the crap out of everyone, because it’s unexpected!


Tech.Rev: So how do organizations move to becoming services businesses?

Ray Wang: To get ready for the services economy, you have to start changing the way you look at your business model. That services economy means a shift from products to services, services to experiences. Let’s go look

.at the toaster example. This is fun. We have a client that asks us how do we actually participate in the world of toasters, and actually take a toaster to the world of IoT, and become digital. We thought that was kind of a crazy question, but they came back to us with something very interesting. When they sell a toaster, they have no idea who the customer is, because they the manufacturers sell to retail outlets, until the customer complains that something is broken.


And of course customers rarely fill out a warranty card. Do you fill out a warranty card? No. Nobody does that. So if you want to get to the services economy, but you sell products like a toaster, you’re going to put a chip in there, and you’re going to say, “Connect to the Internet. Register, and we’re going to give you the latest feature.” That feature you’re going to want is going to allow you to customise the characters you want on your toast, so put any shape you like. Now, with people signing up, you suddenly know which toasters break. How often are toasters being used? What time of day are these toasters being used? How many pieces of toast come in before they actually die?


Now you can actually put a count on it to say, “You’ve got 72 more toasts before your toaster breaks. Would you like to order the new one?” That’s just step one. Step two says, “Hey, guess what? Why don’t you pay me $3 every month for the next five years, sign a subscription agreement with us, and anytime between those three years or five years, depending on a better plan, you can swap out for a new toaster? Just let us know. And we’ll connect you with the new toaster. And it looks like you’re toasting more often. Maybe you need a four slicer instead of a two slicer.”


That’s what’s going to happen. That’s how you get to the services economy, and not by just trying to figure out how are we going to get better warranty on this product. You collect data. 


In a similar way, GE stopped selling CT scanners, plus training, plus maintenance, and started to sell CT scanner-uptime.


Tech.Rev: You mentioned customer experience earlier on.

Ray Wang: Yes, I did. Customer experience is shifting to trying to understand what their intent is. It’s changing because in the digital world, every choice that a customer takes is a demand signal. It tells us what they’re more likely to do. We’re at a point where we can actually figure out what customers may buy or may do, and that’s changing as an overall experience.


If we think about people’s expectations, it’s traditionally been about meeting their needs, anticipating what those needs are supposed to be. Let’s take an example of a smart building. When you walk into a smart building, you assume that it knows who you are. It can identify what you do, and that your experiences are going to be frictionless. In customer experience terms though, it’s really about being one step ahead of the customer so that you give them what they want before they even know they want it.


So in customer experience terms, I walk into a large building. It recognised me. It does a 27-point facial scan. It does a gate analysis. This is where I’m going. It says, “Hey, that look like it’s Ray. He’s on the 15th floor. Let’s get him to the 15th floor.” What’s interesting about that is I haven’t even swiped my badge, right? In fact, I probably don’t have to swipe my badge, and it knows I’m down there. Now, this is a skyscraper. There is lots of people in the building. In fact, it’s 7:30 am. There are hundreds of people down there. They should be sending every elevator down, because they know there are people in the lobby, so they send every elevator down. Now, I’ve been trying to meet with my boss for the last four weeks. There’s a 15-minute window available, and so the system says, “Hey, would you like to go to 15th floor? But wait, your boss, she’s on the 25th floor. Would you like to go there? And by the way, there are donuts on the fifth floor.”

Now you to meet your boss on another floor, and the prompt has come from a super-smart building.


When we think about what we need to do to start in the services economy, the first part we have to say is, “Where can we actually create a service?” We talk about being in a post sale, on-demand, attention economy. Start by understanding what is post sale – all the business models that happen after you sell a product.


Secondly, what do we have to do to build and support those business models? What emerging technologies can actually help you get there?


Once that’s in place, we have to make sure that we have the right people on the ground that know how to respond. We have to start thinking about things like customer success and customer success management. What can we do to enable these customers to be successful?

Finally,  we have to build a data-driven strategy. How do we actually apply data? We’re moving from gut-driven decisions to data-driven decisions so that we can be successful.


And we have to co-create and co-innovate with our partners. We’re not going to be able to do a lot of these things ourselves. There are technology providers we have to work with. There are consultants and advisors that can help give us a different point of view. And sometimes, we’re going to work with our competitors because we build on and share core skills, and then we can differentiate in other areas. That co-innovation and co-creation is probably the highlight of what you can do once you build for the services economy.”


R “Ray” Wang is the Principal Analyst, Founder, and Chairman of Silicon Valley based Constellation Research, Inc.  He’s the author of the popular business strategy and technology blog “A Software Insider’s Point of View”, and of the best selling book Disrupting Digital Business, published by Harvard Business Review Press.

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