In our service design practice, we triangulate the trends of business, technology and society to predict for our clients where things might be in one, three or five years. (Okay, five years is a very long time.) So we’re always gratified when those predictions come true and here’s one we’ve been talking about for years: car monitoring to reduce insurance rates.

In effect, would you make a deal with your car insurance company that you promise not to go over the speed limit, in exchange for a 10% decrease? How about 15 or 20%? In order to prove that, would you be willing to let the insurance company install a small device on your vehicle that tracked your speed? Maybe you get one or two chances, but then the third time you speed – bing – you lose the discount.

Well, that future is here. Progressive Insurance has announced the My Rate Program, which provides a small device that plugs into your car’s on board computer. The device tracks things like when and how you drive your car including acceleration, hard braking, etc. and then sends that data back to Progressive wirelessly. (The system is not based on GPS, so it’s not tracking where you go but still, we can imagine that in a future generation.)

Let’s take this one step further: How about a deal where you promise your life insurance company not to text or talk on the phone while driving, in exchange for a very big discount? After all, that behavior has shown to increase the likelihood of accidents by a factor of four. After an accident, it would be a simple matter for the insurance company to compare the time of airbag deployment with your cell phone bill to determine if you kept your promise. If not, no health care for you or no death benefits for your loved ones. Would you take that deal?

There is a saying that “everything in life is a trade-off,” and with advances in technology these types of automated trade-offs will start to permeate our relationships with service providers and impact pricing options. Watch for these trends in everything from insurance to mortgages to TV and shopping. It’s one thing to have privacy taken away from you, but it’s quite another thing to trade it for cash. So what’s your “break-point,” at which you would give up details of your private life in exchange for a discount? 10%, 30%, 80%? Everything’s negotiable.

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 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!

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.

Today’s Wall Street Journal has an article entitled, “Palm’s Pre Smart Phone Fails to Stem Deep Losses.” The article goes on to describe the Palm’s quarterly loss has quadrupled since the launch of the much-touted Pre on June 6. Revenues are down, profits are down.

But how much of this is attributed to the phone itself, which has been lauded as an “iPhone killer,” versus the partner that Palm chose to dance with on the network provider side? This is a classic case service design example of the symbiotic relationship between products and services. From our vantage point, Palm’s problem is not the Pre product, but the Sprint Nextel network, which is suffering from massive customer flight due to spotty coverage, dropped calls and bad customer service.

As a long-time (and happy) Verizon customer, I have been jonesing for the Palm Pre ever since I saw it in Las Vegas last January at the Consumer Electronics Show. Add into the mix that I am also a long-time (and happy) Palm Inc, customer who started on the old Palm Pilot handheld organizer, moved up into the Treo family of smartphones and is now happily using a Palm Centro. And even though I’m happy I STILL want a Pre. But I will not buy it until Verizon has it. (This is probably also the number one reason I don’t have an iPhone – even though I am Mac everywhere else in my life – you can only get an iPhone via AT&T, another inferior network to Verizon.)

Call me old fashioned, or just call me loyal. But Verizon has always done right be me when it comes to mobile communications and that service relationship is the stake in the ground around which my product decisions are made. This is a key insight of service design that product folks often don’t get: it’s more about the service “eco-system” than it is about individual features of a product.

When is this insanity going to stop? Imagine if you bought a Chevrolet and you could only put Sunoco gas into it. In Europe, the phone networks are independent of the handsets so that consumers are free to combine their favorites. Until the U.S. adopts the same model,  I just have to hope that Palm hangs in there long enough for me to get a Pre on the Verizon network. Please, Santa…

09/11/2009 – Facebook gets service design. See our new blog post here

09/10/2009 – Consumerist: Delta Airlines now has no customer complaint phone line – only their website. Really Delta? REALLY?

09/08/2009 – Great article on Zappos – a poster child of service design – in the New Yorker

09/03/2009 – WSJ reports Southwest Airlines is adding a $10 priority boarding charge – could boost revenue by $250MM per year.

09/03/2009 – WSJ: airlines are upgrading food they sell on board. Suprise! Better quality means more sales. Don’t take captive customers for granted!

09/01/2009 – Wow! Our client, AnySource Media acquired by public company DivX – a great strategic fit!

08/26/2009 – Service design at Wal-Mart: offering a bill-pay service for customers who do not use traditional checking accounts

08/26/2009 – Grant-Thornton study says up to 10,000 retail stores will close nationwide this year, double from 2008

08/25/2009 – Fascinating article about Craigslist on Wired.com

08/25/2009 – Best stat: Craigslist gets more traffic than eBay (w 16,000+ employees) or Amazon (with 20,000+.) Craigslist has 30 employees.

08/24/2009 – Researchers estimate that 25% of dishes billed as “grouper” at restaurants is actually lower-priced “catfish”

08/24/2009 – San Francisco museum uses service design to lure patrons and generate entirely new revenue…

08/20/2009 – Enhancing the live sports experience with high-fidelity, realtime audio commentary….

08/20/2009 – Great Andy Kessler piecs on “Why AT&T Killed Google Voice”

08/20/2009 – Bought a $59 refurb TomTom GPS – celeb voice directions sell for $12.99 – John Cleese, Dennis Hopper, etc. Profit lies in enhancements!

08/18/2009 – Great, simple overview of the healthcare debate in the U.S.

08/06/2009 – Excellent tip for business… @andrewbaron Great story on why Van Halen insisted on the removal of all Brown M&Ms

08/05/2009 – Great overview of the NetFlix’ approach to company culture…

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.