Should companies protect consumers from themselves? That’s the question raised in the recent case of the teenager in California who, once added to his Dad’s Verizon Wireless account, ran up a bill of $22,000 by downloading over 1.4 gigabytes of data on his cell phone. Dad did not have a data plan, so…. as the meter ran (and ran and ran) Verizon was charging Dad by the byte.

In this particular case, Verizon agreed to waive the fee after the story got a ton of press. But typically, on an “oops I made a mistake” case like this, Verizon will split the charge with the customer. (So, Dad would still be on the hook for $11,000!)

The website The Consumerist raises the question: why not create a fail-safe system that would alert a customer if there was an unusual spike in their usage? Credit card companies have done this for years, mostly related to preventing fraud. But is it the job of a corporation to prevent customers from spending too much money on their goods or services? How about sellers of luxury goods or automobiles or casinos? Should companies become their “brother’s keeper?”

Actually, we would suggest a middle ground. When signing up new customers, Verizon should provide the account owner with the option of being notified in case of a spike in usage or fees. They could even offer levels of 100, 200 or 500 percent over normal. These are (or should be) simple variables that can be plugged into their management systems that in turn, would add a great deal of value to customers, if they chose to participate.

(And no, Verizon – you shouldn’t charge for the alert service. Use it as a point of differentiation!)

The Wall Street Journal pointed out an interesting trend this week, in which many of the best known names in corporate America are reversing a long-standing trend and now going vertical with their business models. Using the recent acquisition of Sun Computers by Oracle Software, CEO Larry Ellison plans to transform Oracle into a maker of software, computers, and computer components, and a services arm which will look more like the large computer conglomerates of the 1960s.

According to the Journal, vertical integration is “a 100-year-old strategy in which a company controls materials, manufacturing and distribution. Others moving recently in this direction include ArcelorMittal, PepsiCo Inc., General Motors Co. and Boeing Co.”

What’s causing this trend? Volatile commodity prices, financial pressures at suppliers and quests for new revenue, all of which have become more acute due to the recession. Ultimately, these companies want more control over their destinys and their customers. From our vantage point in the area of service design, one point not mentioned in the article was the role of the Internet on these changes. Since the Internet has made almost everything much more transparent and immediate, large companies can better control the vertical “stack.”

But in the end, time will tell if this trend stays or goes. As Mr. Ellison summed up: “We’re really brilliant, or we’re idiots.”

But then again, Ellison didn’t get to be one of the most successful CEOs (and the 4th wealthiest man in the world after Gates, Buffet and Helu) by being an idiot. Watch this trend.

We have a saying that we share with our clients when talking about service design: “Add value and money will follow.”

What this means is that you should look at your business – your expertise – and find small, inexpensive ways to leverage that expertise for the benefit of either your existing customers,or prospective customers. Often, the net effect is huge.

Why? Because, supposedly, you are the expert in whatever you do. And consumers these days don’t have time to be experts in all things. So they are looking for what we call “editorial filters,” the companies or individuals who know something they don’t, that can point them in the right direction, make their lives easier, safer, richer, more convenient, etc. These are the “trusted advisors” in our lives. You would think that the those vendors who make the most money from us (think lifetime value) would be most incented to actually be a trusted advisor, and not just a provider of a commodity service. (Think bankers, lawyers, insurance companies, mortgage companies, auto dealers, airlines, etc.)

So imagine my dismay the other day when Allstate Insurance – who I have been with for over 20 years and in that time have probably given them over $35,000 of my hard earned cash – sent me a “Happy Birthday” email. Really? A birthday email? Does someone at Allstate marketing really consider this a best practice of “customer relationship management?” Come on folks. This is 2009!

There a plenty of ways for Allstate to add value to our relationship beyond paying a claim I might submit on average, once per decade. How about using that same email to direct me to that online video about the horrors of texting and driving that I could then send to my teenage daughter? (You know I have teenage daughter – she’s on the policy!) Or how about links to defensive driving classes and offering me a 5% discount for taking it? Maybe you could send me the annual list of the top 10 safest cars, as rated by an independent agency? Tips on how to make my car last longer? Anything… except a gratuitous birthday email!

And these are ideas I am coming up with off the top of my head. This is YOUR business – cars, safety, driving, technology, best practices, statistics, data. You have thousands of employees and massive investments in collecting and analyzing all this information. So why don’t you share a bit of it with me – your customer – to make me a better driver, a safer driver – and ultimately a better customer for YOU?

But you better hurry, because statistically speaking I only have about 40 more years of driving (and insurance payments) left!

Need some help figuring this out? Call us – you’ll be in good hands…

We just added four new PDF case studies to our website, which can be found on our client list page. These include case studies about:

- ColorQuick, a software company developing game-changing technology in the printing industry. Our ethnographic research turned up new and compelling benefits for their target market.

- BlackGold BioFuels, an energy technology company that has a patented system for converting waste products into high quality bio-diesel fuel. We helped them design new services that support the technology product, as well as innovative new business models for rolling out their products and services.

- A major hotel chain and our work with them on designing new service revenue opportunities related to rapid developments in the Connected-TV space.

- A major luxury retailer and a series of card sort exercises we did for them related to a new product design initiative.

Also, after a number of requests from our business partners, we created a one-page executive summary about Frontier Service Design that can be downloaded here.

Read, learn and enjoy!

We heard a story the other day from a large infrastructure service company that has over a thousand field service personnel on the road on any given day, around the country. One of the senior executives did a ride-along with one of these long-time employees and heard an interesting story.

“You know, I’ve been driving this van for about 16 years now, going to people’s homes to help them out, or going to troubleshoot at one of our field facilities. For years, I always felt that I was part of a bigger team of people, you know? I’d be driving along and I’d hear the dispatcher coming over the radio calling out assignments to different techs. I’d hear those voices go back and forth and I’d have a feeling for what was going on around me, you know? So, if maybe Jim got assigned to a big issue about a mile away and it was raining, I might swing by there to see if he needed help. Or I might check in with him on the radio. But ever since we got these GPS systems and smartphones a few years ago, I just get text messages from central dispatch telling me where to go next. I go through an entire day never hearing any human voices of people I work with anymore, and frankly, I feel like I’m out here all alone. In fact, I don’t even feel like I’m part of the company anymore.”

The beauty – and terror – of service design is that it all revolves around people. Certainly, we want to leverage technology to make every process run more smoothly but we also have to keep in mind the collateral damage incurred by such choices. In order to provide an outstanding customer experience, service personnel need to feel as though they are part of a larger mission, and community. How has technology disintermediated your employees from your own company and culture?

Every once in a while we take the Frontier team out on a field trip to experience new services and to think about service design. This week, we took a trip to Wegmans the legendary grocery store chain, that is expanding along the east coast of the United States.

This most recent store opened in a Philadelphia suburb called Collegeville, a few weeks ago. Prior to the door’s opening the first day, there were over 1,500 customers lined up outside. Keep in mind, they weren’t giving away anything for free – they were just opening for business!

Here is link to some photos we took that day inside the store. Beyond the selection and prices, Wegmans does a fantastic job creating a very comfortable and inviting shopping environment, while also staffing the store with outstanding people. (They hired 550 out of over 6,000 applicants.) They also pushed the state of Pennsylvania on the definition of what a grocery store could be, and ended up being able to sell six packs of beer. (For those of you who live outside of Pennsylvania, this is a big deal!)

Here is a round-up of innovative uses of vending machines from around the world, compiled by Trendwatching.com. These are all great examples of service design. How, you ask, since they are all selling products? Service design comes into play in the methods in which they have chosen to “get” products to customers. That delivery is, in and of itself, a service supporting the product. In most cases this is about delivering the product to the right customers in the right place at the right time. And in doing so, cutting out a whole chain of middlemen, resellers, and wholesalers. (Is that good or bad? Depends on what role you currently play in that chain!)

This is also another example of technology prices continuing to fall, which make it financially feasible to distribute via vending machines or self-service kiosks. That technology is applied to not only the “machine” itself, but also it’s wired or wireless connection back to headquarters to let it’s owners know when it’s time to restock or fix the machine.  Which of these would you use?

• Barcelona company Lof (short for ‘Lo Fresco’) has developed a range of vending machines that only dispense healthy food, from prepared fruit and ready meals to gazpacho soup.
• Redbox specializes in the vending of DVDs via self-service kiosks. Redbox kiosks are located throughout the US in fast food restaurants, pharmacies, grocery stores and convenience stores, leasing out DVDs from USD 1 per night.
• Launched earlier this year, US based U*tique bills itself as the world’s first interactive, automated luxury store for “life’s little emergencies and indulgences”. Debuting at Los Angeles retailer Fred Segal, U*tique lets consumers learn about selected luxury and personal-care products and have them dispensed with a swipe of their credit card. Only 50 products are available at any given time, and all have been handpicked by product specialists with backgrounds in global beauty, trend-hunting and innovation. The technology features a touch-screen interface, interactive LED lighting design, and a behind-the-scenes robot that delivers products from secure storage into consumers’ hands.
• German farm ‘Peter-und-Paul-Hof’ has begun selling its fresh produce in vending machines. The specially designed Regiomat machines sell milk, eggs, butter, cheese, potatoes and sausage in thirteen German towns and communities.
• The Standard Hotel chain in the US has introduced a retail concept by placing vending machines stocked with designer swimming trunks in their hotels. Quiksilver and André Balazs’ have partnered to fill the vending machines in the New York, Los Angeles, Hollywood and Miami hotels.
• Bike manufacturer Trek set up a prototype Trek Stop Cycling Convenience Center in Madison, Wisconsin. Located outside (and operated by) bike shop Machinery Row, the Trek Stop is a convenience center for cyclists. The vending machine is stocked with bicycle products such as spare tubes, patches, tire levers and more, along with food and cold drinks.
• InstyMeds have developed vending machines to dispense medication. The machines are designed to be placed in doctors’ offices, clinics, emergency rooms and other healthcare facilities. Each holds 100 of some of the most often used medications, ranging from pills to drops to creams and so forth.
• Last year, US Electronics retailer Best Buy installed vending machines at 14 major US airports as part of a successful pilot program for the company’s new Best Buy express kiosks. The kiosks are large vending machines that carry cell phone and computer accessories, flash drives, MP3 players, headphones, gaming devices, travel adapters, and other items that are likely to appeal to customers on the go.
• Kosher Vending Industries in the US operates “Hot Nosh” vending machines that deliver hot kosher meals in 90 seconds. The company originally launched with more than 50 locations in New York City and has expanded nationwide through partnering agreements and regional licensing.

And we particularly like this one, which solves a very specific problem, in very specific places…

• Two British companies now sell their version of portable ballet flats in vending machines at nightclubs: Rollasoles sell for about GBP 5 and come in four colors: Hi Ho Silver, Gold Digger, Back to Black and Pink. Afterheels are similar rollable ballet flats which have the added feature of being recyclable.

A critical part of the service design process is putting into place feedback loops which enable your customer to let you know how you’re doing. This is a delicate matter because you want to do it without disrupting the customer experience. That’s why we applaud Facebook and the way they’ve incorporated a simple feedback loop into their advertising.

Did you ever notice the little “x” at the top corner of a Facebook ad? I kept seeing these annoying ads for “Mafia Wars,” a Facebook game that appears to be wildly popular with others. Out of curiosity I clicked on the “x” up in the corner of the ad, having been conditioned over the years to know that clicking on an “x” makes things go away. That feature is standard user interface component for applications, or a way to get rid of an intrusive “overlay” ad that hides content below it.

In this case, the ad on Facebook was on the side of the page just sitting there. And being able to hit the “x” to just make it go away is a great idea. But before the ad goes away, Facebook solicits your feedback by asking “Why don’t you want to see this ad?” Your options are misleading, offensive, uninteresting, irrelevant, repetitive or other (in which case a text box pops up for your custom input.)

After making a selection, you see “Thanks for your feedback. Over time, this information helps us deliver more relevant ads to our users.”

There’s also the famous “thumbs up” logo at the bottom of the ad to show that you like the ad. (It would be interesting to see a breakdown of how many people click the “thumbs up” versus the “x” – and why.)

This is such a simple, yet powerful tool. Why don’t other websites integrate this feedback feature into their online advertising? The whole point of the web is that is interactive. “Ask and ye shall receive,” right? We all know that ads are the currency of the realm when it comes to delivering content. So why not do everything you can to get feedback from viewers as to what they like or don’t like, and why?

Smart move Facebook, and a great example of a powerful feedback loop for service design!

Last week the Wall Street Journal ran an article about Wi-Fi services available on airlines. Bottomline: people love it, but really aren’t willing to pay for it. Why not?

According to the article, “in tests and now in regular service, usage drops off considerably when travelers must pay for the service.” Even Alaska Airlines, which only charges $1, saw a steep drop off in usage. (By the way, Alaska Airlines is a “cashless” airline, so if you want the Wi-Fi, you have to pay for it with a credit card – ggrrrrrrr.)

So what’s going on here? Is the economy causing people to cut back on non-essentials? Or have people become so used to ubiquitous computing that they expect “the cloud” to envelope them everywhere, all the time, for free?

Or could it be – as we suspect – that sitting in an (albeit overpriced and cramped) airline seat at 35,000 feet is one of the last places where you can seek refuge from our “always on” world of instantaneous communications?

An interesting question to answer for sure, and one which has ramifications for service design in the worlds of travel, entertainment, and hospitality.

Interesting times in the media worlds as the television and Internet continue their mash-up dance. Some interesting statistics from a recent article by Terry Teachout.

In 1949:
- Americans owned 85 million radios
- Americans owned 1.3 million TVs – of which over 70% were located on the east coast
- a 16 inch picture tube TV $695, or the equivalent of $6,212 in today’s dollars.
- TV networks were losing money at a clip of about $116,000 (today’s dollars) EACH day

Then came the tipping point. Fifteen TV stations on the east coast and in the Midwest got connected via a crude coaxial cable network, which enabled far more viewers to see network programs “live.” As a result, movie theater attendance dropped by 72% but bars who had TVs installed were filled to the rafters on certain nights.

Who made it safely to the other side? Big (radio) media companies who kept funding their vision, and entertainers who embraced the new medium, as opposed to pining for the past. Bob Hope and Big Crosby made the leap from radio to TV, while Fred Allen, a big radio star, decried the loss of the “theater of imagination” that radio made possible, and got left on the far shore.

These are underlying principals of service design; understanding what customers want, using technology as an enabler, and being patient to see your ideas to fruition. (This latter point is difficult for public companies who live quarter-to-quarter.) All in all, the transitions of previous media shifts are all good history lessons for today’s media executives.