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.

The California Academy of Sciences, a natural history museum in San Francisco re-opened last fall in a $488 million eco-friendly building. Beyond the new digs, they also apparently have a new attitude as well. They now stay open late Thursday nights and transform the museum into one of the city’s hottest night spots. More than 3,000 people drink and dance while touring the hands-on tide pool, aquarium, planetarium and four-story tropical rainforest. But book your $10 ticket now because they often sell out in advance.

Who the heck wouldn’t want to hang out in a cool aquarium for happy hour, rather than sitting in bar? We’re glad to see that the lawyers haven’t killed off this idea (can you imagine the wrangling that took?) and see this as a great example of service design. Museums are, after all, in the service business, delivering memorable learning experiences. Massive sums of money are put into bricks, mortar, collections and all the people needed to support it. So why not leverage those sunk costs into new and innovative revenue streams?

It makes perfect, brilliant sense to open the museum after-hours in this way. It provides an uber cool backdrop for socializing, and who knows – you just might accidentally learn something while sipping your mojito.

Longing for a taste of the good ol’ days? The John W. Hartman Center for Sales, Advertising & Marketing History at Duke University just posted thousands of television commercials created or collected by the D’Arcy Masius Benton & Bowles (DMB&B) advertising agency, from the 1950s to the 1980s. From American Express to Vicks VapoRub, they’re all here. (Did not remember the spots for Fluffo Shortening, but they’re all here too!)

Click here to jump into the time machine.

From Wikipedia: “DMB&B was established in November 1985 by the merger of the Benton & Bowles (B&B) and D’Arcy-MacManus Masius(D-MM) advertising agencies. DMB&B created the original Santa Claus icon for a Coca-Cola ad, as well as the slogans “This Bud’s for you” for Budweiser and “Melts in your mouth, not in your hands” for M&Ms. They were acquired by Publicis and closed in 2002.”

These ads reminds us of simpler days, when advertisers could simply blast a clever message out through the limited media channels (NBC, CBS, or ABC) over and over and over, to win the hearts and minds of American consumers.Today, the challenge is much complex and requires actually listening to consumers and speaking with them, as opposed to at them.

Unfortunately, we’ve seen too many current-day ad agencies who are still stuck in the time machine, longing for the “good ol’ days.” This is where service design can help.

We recently came across an amazing service designed for kids; a Brooklyn, NY storefront appears to cater to outfitting superheros for his/her next crusade. The shelves are lined with tools of the trade – invisibility paint, capes, deflector bracelets, and bottles of chaos and anti-matter. Customers are treated as real superheroes throughout every facet of the customer experience – and take an oath when they leave the store not to share trade secrets with “villains.”

An actual business generating real revenue, this novel idea actually creates a comfort zone for the real business in the back-room; a non-profit creative writing and tutoring center called 826NYC.

Imagine students, who are hesitant at best when their parents sign them up for extra help (equaling extra homework.) Now they enter a cool and unique storefront, and get to the tutoring center through a secret bookcase in the back wall. What kid wants to walk into a storefront that says “Tutoring Center?”

826NYC is the second in a series. A pirate supply store called 826 Valencia, located in San Franscisco, was the first tutoring/creative writing center and was the brainstorm of Dave Eggers, author of the Pulitzer Prize finalist novel “A Heartbreaking Work of Staggering Genius.”

Since then, sister sites have popped up all over the country with different themed storefronts. Seattle has a space traveler theme and 826 Michigan is a robot supply and repair shop.

Many times, we assist our clients in finding new service design concepts in the most obvious places. This story also shows that sometimes you have to “zig” when logic would tell you to “zag.” Kudos to Dave Eggers and everyone involved with his tutoring program for thinking differently in order to help kids bridge the gap between their own inner hero and their schoolwork.

Click here to see a Dave Eggers discuss this project at the 2008 TED conference.

My wife goes to our local bank to make a deposit in the ATM. The rain has soaked the deposit envelopes stored outside. She walks into the branch to let someone know. She approaches the teller line, where there is a short line. A woman sitting at a nearby “Customer Service” desk asks brightly, “Hi, is there something I can help you with?”

“Yes, actually. I wanted to make a deposit at the ATM outside – but all the envelopes are wet from the rain.”

“Hmm. Okay, thank you! I’ll tell Bill to replace them at three o’clock…” She smiles and returns to her paperwork.

My wife looks at her watch. It is one o’clock. She replies, “Well, I think there might be some people who will want to make a deposit over the next two hours…”

The woman looks up with an expression of consternation. “Well, I’m not changing them!”

Without missing a beat, my wife replies, “OK, well if you give me some envelopes, I’ll just put them out there.”

Now the woman behind the desk is perplexed. “Uh no, wait. I, uh, can’t have you do that…..”

The woman puts down her pen, gets up from the desk and approaches my wife. “I have an idea – I’ll just take your deposit and process it myself! I’ll be right back…”

With that, the woman disappears behind the counter for nine minutes. The wet envelopes stayed in their holder that day, and surely the next time it rains they will get wet again.

Is this an example of poor customer service? A crashed user experience? A broken golden rule? Actually, it’s a multi-part service design challenge that points out the importance of understanding “service eco-systems.” From the culture of the bank to service protocols to customer touchpoints to the physical layout of the ATM and building – everything is inter-connected. Service design looks at the big picture to make things better not only for customers, but also for employees. Everybody wins.

Now if you’ll excuse me, I have a call to make…

Thanks to Mark Davis and his staff at Bentley University, in Waltham, MA. Their “Art & Science of Service” conference last week was a big success, with attendees from industry and academia who came from as far away as Germany, the Netherlands and Israel. There were lots of good contacts and networking opportunities. Our workshop, “Thinking Outside-In: Identifying New Service Revenue Opportunities” on Friday (see photo), generated some good interaction among the attendees. Thanks to all who contributed!

Some key takeaways from my conference notes:

• Out of IBM’s $103 billion USD of annual revenue, services now respresent more than half – $57 billion USD.
• IBM: Service science is more like biology (focused on classification) than physics (focused on mathematizing).
• “Service is value co-creation” – not just about money, but also about knowledge.
• At one hospital in the Boston area, a 1% turnover equals $250,000 USD. At one point, their turnover (prior to a new management team with a service design focus) was up around 20%.
• Why not show the wait times in an emergency room, similar to an airport terminal or deli counter?
• M2M acronym equals “machine to machine”
• Technology which enables M2M is exploding – both embedded devices and the back-end services. (Can security risks/opportunities be far behind?) This will have big impact on service design.
• What’s needed is a conference specifically focused on “service design in healthcare.” Lots of best practices and case studies, but it such a large sector that it needs its’ own vertical focus.

We recently attended a meeting at Turbine Hall on the shore of the Delaware River, just south of Philadelphia in a town called Chester. What an amazing rebirth of a building that was designed for something completely different.

We love these types of conversions because they are perfect examples of service design. After all, for decades this building housed massive electrical generators, which provided essential services to both consumers and businesses. As technology advanced over the years, a new power generation plant was built in a new location, rendering this massive structure obsolete – until a group of visionaries saw the potential and applied service design principals to re-imagine new possibilities.

Built in 1916 by The Philadelphia Electric Company, and completed two years later, the Chester Power Station is an example of early twentieth century greatness.  The building was designed by architect John T. Windrim, and engineer W.C.L. Eglin. It was also Windrim who designed The Franklin Institute, The Academy of Natural Sciences, and The Free Library of Philadelphia.

In 2001, the building underwent a $75 million transformation and now hosts a wide variety of high-technology businesses inside. The great open area that once housed the power-generating turbines is now a mixed-use event facility aptly named Turbine Hall. The space is 40,000 square feet with 100 foot high arched ceilings, and a beautiful view of the water. If you’re looking for a dramatic space to host a large event, check out this space.

A book which had a big influence on our thinking back in the late 1990s was "The Innovator’s Dilemma" by Clayton M. Christensen, a Harvard professor who illustrated in very simple and elegant terms how disruptive innovation is brought about not by the folks with the big R&D budgets, but by smaller companies who "thought differently." Instead of adding feature upon feature, these innovator’s create products and services that are "good enough" at dramatically lower (and disruptive) price-points. Christensen and his colleagues have now set their sites on one of the biggest and toughest issues now facing the United States; healthcare.

In the recently published "The Innovator’s Prescription: A Disruptive Solution for Health Care" Christensen, along with co-authors Jerome H. Grossman M.D. and Jason Hwang M.D. lay out some very fundamental and easy-to-understand concepts as to why the current healthcare system is broken. You can read an extended excerpt of the book at the Forbes website, and we have chosen some of the "best of the best" ideas below.

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In order to understand how to "fix" hospitals, first it’s important to understand the value proposition of hospitals. Hospitals have become the workshops within which physicians could be trained and practice their intuitive craft, clinical laboratories where complex medical cases could be solved and unanticipated emergencies and complications could be resolved with as much certainty as possible.

This value proposition has been a great fit for solving poorly understood problems of the past, such as tuberculosis in the early 1900s, poliomyelitis in the 1950s and AIDS in the 1980s. When these diseases were first encountered, they had to be addressed in hospitals. However, in terms of the complexity of diagnosing and treating disease, for a century hospitals have been on a relentless upmarket march on the trajectory of sustaining innovation.
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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!