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 big part of our business is working with companies to understand the changes that technology – and specifically broadband – can bring to their business. There is probably no better example of this than the coming wave of “Connected TV” in which consumers will be able to connect their high speed broadband connection (via wire or wireless) directly to their HDTV set. The net result is the ability to watch any Internet video on a big, crisp screen from the comfort of your couch or favorite easy chair.

There is a lot of great content on the Web that will just never make it onto a cable channel. Whether it’s big-idea speakers from the TED conferences, or “how to” videos from Instructables, or independent films from Atom, I want to watch this long-form content on my TV, not my PC.

While this has huge impact for consumers, it will fundamentally change the relationship that HDTV manufacturers have with their customers. To date, the consumer’s “relationship” is with their cable provider. Historically, the TV manufacturer simply sold a big piece of glass, diodes and plastic and that was it. Less than 5 percent of consumers even sent in the warranty card.

But with the advent of connected-TV, the consumer electronics companies now find themselves in need of service design. Because now they have a very tight connection with the consumer and the revenues from services over the life span of the product will far exceed the revenues from the hardware. After all, there’s got to be some way of organizing and navigating the ever-growing mass of video content that is out there which in turn will lead to a wide variety of other value added service.

This is why we’re excited to be working with AnySource Media. They essentially empower the HDTV manufacturers with a four-pillar platform that brings Internet video to HDTV. These pillars include the embedded software that resides in the HDTV, pre-negotiated video content deals, an advertising platform that dynamicaly matches viewers and contextual ads, and a backend data center that ties this all together.

Connected TV is a “tipping point” technology. You’re already seeing the first few models come with many more to follow in 2010. I predict that by 2012, we’ll all be reminiscing about the “old days” when you couldn’t access your favorite show from the cloud, on demand.

This is not about watching more TV – this is about watching better TV, which means content you want, when you want it.

Pricing levels and methods are an important part of service design. Especially when you are changing them for a pre-existing service. That’s why it was interesting to see the awkward way in which Ryanair, the Irish discount airline, is handling their most recent announcement.

In a move to further automate their service, Ryanair, the Dublin-based budget airline announced it would introduce a $7.50 USD on-line check-in fee per passenger, per flight on new bookings. In addition, they plan to fine customers $60 USD if they do not print out their boarding passes prior to arriving at the airport. The airline hopes to shut down al of its traditional check-in desks at 146 airports by October 1st.

The move will eliminate about 100 jobs at Irish airports and Ryanair is set to save millions of pounds by ending its contracts with check-in services at European airports. Ryanair says the proposal will help passengers avoid “time wasting queues and delays.”

We’re all for that, but why charge a customer to check-in online if a) you are realizing dramatic cost-savings in the process and b) it’s the only way they can use your service?

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I’ve long said that other industries – particularly print, television and film – can learn a lot from the brutal upheavals that the music industry has gone through related to digital conversion. So here is a very specific example of how a band is adding value to the "analog" live-concert experience by adding "digital" perks. These types of pricing/value strategies are in integral part of the service design process.

The pop band No Doubt is giving away a free download of its entire digital audio catalogue, comprising more than 80 songs from the band’s seven studio albums, when a consumer buys one of their top-tiered concert tickets. Tickets for the No Doubt tour, which kicked off May 2 in Atlantic City, has a variable pricing model based on venue. The free download offer applies only to top-ticket price levels, typically priced at $42.50 USD or higher. (Of course, this is before additional ticketing-related fees kick in.) In addition to the band’s past songs, the download will also include "Stand and Deliver," a brand-new song that will be performed for the first time in May.

There are a number of these types of bundling deals happening in the music industry, and clients in other industries would be well served to carefully watch the music industry as the "canary in the coal mine." What opportunities exist for you to add value value to your service by bundling in digital assets?

When we engage with a client for service design, one of the things we always do is scan their industry, as well as other industries, for any technology that might be a good fit for their particular solution. Too often, companies are inclined to believe that their problem is so unique that only a custom application will do. But by spending some time on deep research, this “re-purposing” ultimately saves our clients tremendous amounts of time and money. One of the areas we have learned to tap into is the U.S. government. With the right search methods, you can uncover a treasure trove of data, software, and intellectual capital that is available for the asking.

An article in today’s Wall Street Journal shows how software, already funded by the U.S. taxpayers, could be the lynch pin to solve one of the most dysfunctional aspects of the U.S. health care crisis. The potential solution lies in a software system that was designed to manage the medical records for Veteran’s Administration hospitals across the country. The software, dubbed VistA (Veteran’s Health Information Systems and Technology Architecture) has been created with several billion dollars of taxpayer funds over the past two decades. The system is now used in over 1,400 VA facilities and the source code is now in the public domain.

According to the paper, “Paperless technologies have revolutionized banking and retailing. But even after a decade-long effort to modernize health care, fewer than 2% of the nation’s 5,000 non-VA hospitals have what could be considered a comparable full-fledged system, according to a recent survey in the New England Journal of Medicine. Hospitals say they haven’t been able to afford the cost of the systems, which range from $20 million to $100 million, and the current economic crisis isn’t helping.”
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The App Store for the iPod has been getting a lot of attention, but another intriguing aspect of the iPhone has gone relatively unnoticed. During the recent preview of the iPhone 3.0, Apple announced that they would be opening up the 30-pin connector at the base of the device for third-party hardware accessories (and software apps that can take advantage the inter-connect).

This is a big deal. Why? Because now, this “device” can talk to other “devices.” Imagine all types of input or output devices, from blood pressure or glucose monitors, to breathalyzers, to biometric or security devices. This list goes on and on, for both consumers apps as well as very focused B2B applications. The great thing is that Apple already has an installed base of 30 million devices with a very powerful (and ever-growing) developer base with over 25,000 applications deployed to date.

Hardware and software, products and services. The lines are blurring more and more – all requiring more refined service design.

J.P. Morgan Chase & Co. , the new owners of Washington Mutual, Inc. are undoing the roughly $1 billion branch make-overs that WaMu implemented in about 900 branches. The radical design was called "Occasio," which means "favorable opportunity" in Latin, and was even patented by WaMu to keep other banks from using it.

The re-think replaced bank-teller windows with free-standing counters and cash-dispensing machines to create a warm and fuzzy retail-banking strategy. Apparently, the design was implemented by a retail design firm that also designed the Disney retail stores. But the question is: did they have experience with service design? Designing a space in which people deal with their money is far different than buying plush toys.

When WaMu customers walked in the door they saw a "concierge desk" where an employee would direct them to tellers standing in the middle of the branch. Since Occasio tellers didn’t handle cash, customers who wanted to withdraw money had to take a slip of paper from a teller to a cash dispenser, entering a numerical code.

Other banks have tried but failed to reinvent the traditional branch concept. In the late 1990s, First Union Corp., now part of Wells Fargo & Co. , launched "Future Bank," emphasizing video kiosks and electronic banking over traditional teller transactions. It was a flop, hurting the Charlotte, N.C., bank’s revenue and fueling a customer backlash that took years to mend.

Even the J.P. Morgan executive charged with dismantling Occasio had his own flirtation with one-on-one teller stations earlier this decade when he ran the retail business at Chicago-based Bank One Corp. "We thought it would be more engaging for customers to be close to the teller," he said. "It just didn’t work."

This article from the Santa Cruz Sentinel newspaper outlines a growing trend in service design for healthcare; using email to get a quick answer directly from your doctor.

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An online system, which made it possible for 120,000 patients at Santa Cruz Medical Foundation to check their medical records online, receive lab results and make an appointment for free, now allows them to e-mail their doctor for a fee of $5 a month.Patients will have to decide whether they would rather phone for free or pay to use e-mail.

In the Palo Alto area, which implemented a secure online system several years ago, about 45 percent of patients signed for the free services. About 6 percent use the e-mail message service for which there is a charge.In Santa Cruz, about 16 percent of patients have taken advantage of the online system since it become available a year ago.

About 36 percent of doctors in the United States communicated with patients online last year, up from 31 percent in 2007, according to a survey by Manhattan Research. Those who don’t communicate online are concerned about privacy issues or legal liability — or they feel they should be paid for the time they spend answering e-mail.

Medicare doesn’t allow doctors to bill for e-mail or e-visits, but doctors are hopeful that policy will change eventually.

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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Some excerpts from a recent article in The Economist…

"In recent years, consumers have become used to feasting on online freebies of all sorts: news, share quotes, music, e-mail and even speedy internet access. These days, however, dotcoms are not making news with yet more free offerings, but with lay-offs—and with announcements that they are to start charging for their services.” These words appeared in The Economist in April 2001 , but they’re just as applicable today.

The only reason it had not worked the first time around, it was generally agreed, was a shortage of broadband connections. The pursuit of eyeballs began again, and a series of new Internet stars emerged: MySpace, YouTube, Facebook and now Twitter. Each provided a free service in order to attract a large audience that would then—at some unspecified point in the future—attract large amounts of advertising revenue. It had worked for Google, after all. The free lunch was back.

Ultimately, though, every business needs revenues—and advertising, it transpires, is not going to provide enough. Free content and services were a beguiling idea. But the lesson of two Internet bubbles is that somebody somewhere is going to have to pick up the tab for lunch.