Analysts are priming the pump for this week’s CTIA Wireless trade show in Las Vegas by shifting the focus away from handset design and toward innovative programs related to GPS, messaging, games and other services. Research in Motion plans to launch "App World," in response to Apple’s wildly successful "App Store." Not to be outdone, Google has their "Android Marketplace" and Microsoft unveiled their "Windows Marketplace for Mobile" last month.

We can’t wait for handsets, access plans and applications to all be unbundled, giving consumers the ability to buy "best of breed" of each. Can you imagine how different the personal computer market would have been if you could only use Microsoft Word on Dell computers, or if you could only get Verizon broadband access on Gateway computers?

Skype is launching iPhone software that will enable callers to use local wi-fi networks to make free calls to other Skype users, or low-cost (2.1 cents per minute) calls to any other user. In effect, this enables iPhone users to cancel their AT&T access plans (as long as they’re near an open wi-fi hotspot) and enables owners of Apple’s iTouch to make phone calls via wi-fi as long as they add a microphone to their device. (The iTouch has virtually all the features of an iPhone, without the phone

eBay seems to be learning the hard way that improving the products you have can be better for business than expanding into new arenas. The Wall Street Journal reports that the one time Internet star is scaling back on its attempts to venture into the new products market, instead leveraging their established dominance in online auctions.

eBay’s model was simple. Individuals with an attic full of “antiques” they didn’t want, could create an online auction to sell their treasures to the highest bidder. EBay’s primary functional role was to serve as the auction forum and to monitor buyers and sellers, insuring complete transactions.

eBay’s dominance in that market gave it the necessary leverage to purchase online payment portal PayPal in 2002 and Internet telephone service Skype in 2005. PayPal has been and will continue to be a powerful source of revenue for eBay. Skype, which offers a service well outside of eBay’s core competency, has yet to produce profit for the company.

These purchases represent good and bad ways of expanding a business to create new revenue streams.

PayPal was a logical purchase, given the fact that the online auction participants want a fast, secure way to transfer money. This is a great service for making the auctions run better for everyone involved.

Skype on the other hand is a service that offers low- or no-cost voice and SMS transmission via the Internet. Auction participants don’t need to chat with one another; they need to move their treasures quickly.

Creating new services that leverage your existing products is much more likely to create new revenue streams for your company, than venturing into completely unknown territory.

IncBizNet , the online site for Inc. Magazine, just posted a video clip from our service design workshop in New York City. Check it out below.

You can also find a set of photos from the workshop on Flickr.

Thanks again to the entire staff at IncBizNet for organizing a great event!

A recent New York Times article reveals that Wal-Mart Stores are entering into a new service sector aimed at improving and streamlining patient care. This story is a great example of how products, services and distribution systems can be mashed up in new ways to solve big problems.

President Obama’s administration has proposed using $19 billion in incentives from the stimulus package to help physicians to adopt digital medical recordkeeping. Presently, only about 17 percent of US physicians are using computers to keep patient records – most still use paper.

Nearly three-fourths of physicians work in small practices, where the price of installing and maintaining a full digital medical records system is much too high. Wal-Mart, via it’s Sam’s Club brand, recently announced plans to offer a turnkey solution that involves them partnering with Dell Computers and eClinicalWorks , a software company that specializes in digital medical records software packages.

Under the plan, physicians will put the digital medical records software package in their Sam’s Club shopping cart alongside their giant container of pickles. Once purchased – presumably with help from the stimulus package money – Dell will provide the practice with either a desktop or tablet computer and eClinicalWorks will load, optimize, and maintain the software, as well as provide training. The cost of the package is projected as being $25,000 for the first physician and $10,000 for each additional physician in the practice. This is significantly cheaper than other similar software packages on the market.

If this venture is successful, Wal-Mart and its partners will be directly responsible for enabling physicians nation-wide to keep better, transferable patient records that should have a direct impact on the quality of care for patients.

It’s a big step in a new direction for the world’s largest retailer, but they hope that their experience in moving massive volume at a low price will help physicians and patients step into the 21st century technology world. According to the software vendors who sell the records systems, it’s just not cost effective for them to reach small physician offices in remote areas. This is where Wal-Mart’s massive distribution network comes in. This is a great example of combining what two companies do best in order to create an easy-to-buy solution for the customer.

We were profiled today by The Phoenix , a local newspaper and I think it was very well written on our approach to service design. Here’s the article…

New Start-up Focuses on ‘Service Design’

Wednesday, March 18, 2009 8:39 AM EDT

By G.E. Lawrence

MALVERN — For Charlestown resident Bob Cooper and Frontier Service Design LLC, the most interesting part of finding ways to add to a company’s bottom line is its intellectual challenge.

"We want to work with clients who know what they know, and more importantly, know what they don’t know," Cooper says. Clients who are "eager to find a knowledgeable and experienced partner who will help them know what they don’t know."

That’s no Zen koan: it’s a principle of a business model emerging out of Cooper’s over two decades working with corporate clients, and discovering along the way undiscovered value in what they do — leading to the development of new and consistent revenue streams.

"The most fun and profitable relationships for everyone," Cooper says, are those "where we really get inside the business, understand the culture and the people, and really make a difference through service design."

"Service design?" Yes, the focus is on "service," in a national economy in which 70 percent of gross domestic product is in services, not products — but on the services surrounding manufacture, as well.

His new company, Cooper says, takes "an approach to help companies design, prototype and launch" service innovations, by getting to know a company’s processes thoroughly, and applying good ideas and best practices across industries, developing in the end "new and recurring revenue streams.

(more…)

Have you ever visited Teavana ? In case you’re not familiar, Teavana is a retailer of high quality loose leaf tea. Most of their stores are in upscale malls, and that setting provides them with the perfect spot for a bit of what I call "retail theatre."

Teavana begins the customer experience before you reach the door. There is a table with samples of exotic teas, just on the threshold of the store. A staff member greets you and asks if you’d like a sample. Typically, one sample has caffeine and the other does not, thus something for everybody. Once you take a taste (delicious), the staffer invites you into the store. From there, it’s like being taken through a tea museum by a well-trained docent. I am a coffee-drinker but it was like a whole new world was opened up to me. Everything from the lighting, the color pallette used in the store, the new age soundtrack and the smells – oh, the smells – was like walking through some type of exotic garden. Loose teas from around the world made me feel as though I was on the threshold of a whole new world I never knew existed. The staffer guided me in a loop of the store and before I realized it, we are standing at the check out counter. She removed the lid from a large canister and waved the lid toward me in short, dramatic sweeps of her arm. My nose filled with a variety of intertwined scents – chocolate, orange, cinnamon, and others I couldn’t identify, but enjoyed nonetheless.

The point is that they make a visit to Teavana a whole experience that engages all of my senses – taste, sound, sight, touch – as well as my interest. All the tea’s a stage, and the customer is a guest star upon it. (more…)

Our latest case study is now available. This describes the service design process we went through with Complete Healthcare Communications to transition an internal database from "a cost of doing business" into a vibrant, revenue-generating service that delivers multiple benefits to subscribers and CHC. This will also be permanently posted on our client list as well. Enjoy!

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Frontier Service Design Helps Complete Healthcare Communications
Turn Internal Cost Center Into New Revenue Source

Background
Complete Healthcare Communications, Inc. (CHC) is a publication planning and scientific medical writing firm based in Chadds Ford, PA that has been servicing the top pharmaceutical firms and brands since 1994. With more than 115 professionals, CHC employs one of the largest, in-house medical writing staffs in the industry. The company is top performer in its industry. But that did not keep Bob Norris, founder and CEO, from wanting to explore new ways in which to grow the company.

"I had been very focused on building a best-of-breed medical communications company, but as I looked around the pharmaceutical and broader life sciences industry, I wondered if there were other opportunities for our firm," explained Mr. Norris.

Understanding the Business
As part of their standard service design process, Bob Cooper of Frontier Service Design worked with CHC’s senior management team to assess the organization’s internal strengths. As part of this process, Frontier examined the current services that CHC provided to its clients, the relationships they had with those clients and trends in the pharmaceutical industry. In addition, Frontier identified the assets that the company had, in the form of knowledge and technology. Frontier was asked to evaluate the value and commercialization potential of an internal database that had been built by CHC employees over the years as a potential new revenue opportunity. The database had been used as a tool by CHC’s account teams to track peer-reviewed medical journals around the world. (more…)

During the dot com meltdown and the resulting economic "correction," companies cut everything they could think of in order to stay afloat. Many were over-leveraged and had to stop all forward-thinking momentum just to keep the lights on.

Sound familiar?

There were a very few companies, however, that took every dollar they could get their hands on to create in the midst of the downturn. They hired the innovative creatives and put them to work. The goal was to come roaring out of the recession with some new service or product (or both) that would take some existing something and make it new again.

Case in point?

Apple’s iPod and iTunes.

Love it. Hate it. It doesn’t matter. That product and the service that accompanied it changed everything.

The iPod took an existing idea, the "Walkman " and more modern "Discman " and made it smaller, gave it better battery life, and created rewritable capacity that was far larger than a CD or cassette tape.

iTunes tapped the vast but complicated world of online illegal music sharing, gave it an intuitive interface, charged a reasonable amount of money, and set it free in the wild. (DRM is another issue entirely that crossed the minds of  few at the time.)

As the iPod made the Discman a relic of the past, iTunes made illicit music sharing the realm of only the most die hard of pirates.

This is service design. Seek out that sweet spot where product and service meet customer reality. Then innovate. It’ll blow things wide open.

Last week during my service design workshop for Inc. Magazine, I cited the study from Bain Consulting in which 80% of executives from large public corporations believed that they were providing "outstanding customer experiences" to consumers. I asked the group of privately-held company CEOs to guess what percentage of customers actually agreed that statement. People called out "30%," "20%," "15%!" It was like a reverse auction. And yet nobody even came close to the dismal truth that only 8% of customers agreed that they had an outstanding customer experience. You could actually hear a collective gasp in the room when I told them that the number was 8% and that the execs had missed it not by a factor of two or three but by a factor of 10!

I’ve been thinking a lot about this disconnect within large corporations. Why does it exist? I have a couple theories, and the first revolves around the old saying, "familiarity breeds contempt." It’s tough to nail down who first said that, either Aesop in a fable or St. Augustine ("vulgare proverbium est , quod nimia familiaritas parit contemptum.") And while this saying is most often associated with individuals and inter-personal relationships, I think it’s true for companies and their customers. In traditional marketing there is a mad rush to get new customers, as opposed to really understanding the customers you have, which in turn, would help you attract more customers. (more…)

A recent article in the Wall Street Journal shows how service revenues can dwarf product revenues for manufacturers. One case in point: the aviation industry. According to GE Chairman and Chief Executive Jeffrey Immeltt, GE has sold $13 billion in aircraft engines since 2006. Over their 30-year life, those engines will generate about $90 billion in service revenue. In this case, service drives 7X the initial product price.

From aircraft engines to locomotives, GE expects that 75% of its industrial operation’s $85 billion in revenue will come from services this year, up from 65% in 2007. Companies in other industries, such as Siemens AG and Caterpillar Corp., also are leaning on service revenue as product sales slow. At United Technologies Corp., whose products include Otis elevators and Sikorsky helicopters, roughly 40% of revenue came from parts and services last year. Of course, plenty of companies are looking to grab those service revenues away from the original equipment manufacturer (OEM.) Why? Because it’s lucrative. After-sales services and parts typically yield 25% of revenues and nearly 50% of profits for industrial companies, according to consulting firm Accenture Ltd.

Even though total sales fell 12% in the fourth quarter for GE’s aviation unit, rising service orders propelled a 21% profit increase for the unit. GE’s backlog in aviation services rose 9.5% last year to $55.2 billion, representing nearly half of the company’s total services backlog.

In this economy, everyone from consumers to large corporations must do more with less. Often times, that means keeping older equipment running longer, as opposed to buying new. That’s bad news for manufacturers, unless they have strong service divisions to back them up, and good news for service innovators.