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Robert Bau 1/3/25 Robert Bau 1/3/25

Let’s (not) get (too) physical, physical • 5

Thinking services instead of products: Inclusion > Exclusion

While the shift from products to services – often referred to as servitization – is far from new, it remains a powerful framework for manufacturing companies and digital-first startups looking to embrace customer-centric, service-dominant business models. In this blog post, I explore the Inclusion Over Exclusion strategy, one of seven ways to think services instead of products.

5. Inclusion > Exclusion

The Inclusion Over Exclusion strategy is about removing discriminatory, socioeconomic, cultural, linguistic, physical, or financial barriers that prevent underrepresented and historically excluded groups from fully accessing, engaging with, and benefiting from products and brands (adapted from Linares, 2021).

The emphasis shifts from making physical products and built environments more universal or accessible to delivering supplementary services that reduce barriers and foster a sense of belonging throughout the customer journey. (Loosely based on Bau 2006, 2010, 2011, 2015.) The thinking applies broadly to digital experiences as well, albeit with some adjustments to the terminology.

Note: Compared to a product-centric and compliance-based approach to DEI, a genuine service design mindset pays careful attention to how experiences are envisioned, co-created, co-produced, and co-delivered across phases, moments, and touchpoints in the customer journey.

In this discussion, I highlight nine strategies for staging equitable experiences and advancing equitable outcomes.

Power tip: These strategies will help you systemically and systematically uncover opportunities for new or enhanced supplementary services across the entire customer journey, from ‘Learn & Buy’ to ‘Repurpose, Resell, or Recycle.’ For more context, see my blog posts on the Solutions Over Products strategy and the Journeys Over Transactions strategy.

Strategies for staging equitable experiences and advancing equitable outcomes throughout the journey

Ensure welcoming, respectful, and safe experiences for all, regardless of ability, identity, or cultural background. See my blog post Going for gold • 7.
Encourage customization and personalization of services, products, and touchpoints to meet individual needs. See my blog post on the Individualization Over Standardization strategy.
Deliver flexible and adaptive solutions that address individual needs in real-time. See my blog post on the Individualization Over Standardization strategy.
Democratize access to high-value assets and resources. See my blog post on the Access Over Ownership strategy.
Connect people with similar goals, interests, or challenges. See my upcoming blog post.
Give people from diverse backgrounds a voice and agency in shaping services and experiences. See my blog post Going for gold • 7.
Empower and equip employees to champion and drive the implementation of DEI initiatives. See my blog post Going for gold • 7.
Drive accountability by setting clear DEI goals, tracking progress, and ensuring transparent reporting.
Foster a culture of continuous feedback, learning, and adaptation to ensure ongoing relevance with evolving user needs and DEI practices.

Examples: Walmart offers sensory-friendly shopping hours for customers with autism and other sensory sensitivities (2023–present). Sephora provides multicultural and multilingual consultations, where beauty experts provide personalized advice in the customer’s native language and adapt recommendations to local beauty standards and cultural preferences (2015–present). Target invests in diversity and inclusion training to ensure employees are equipped to engage respectively and inclusively with customers of all backgrounds, identities, and abilities (2013–present). Makani Homes offers a platform for Muslim travelers to swap homes or book accommodations that cater to their cultural values and preferences (2024–present). Inclusive Design Research Centre helps organizations make their offerings more universal or inclusive (1993–present).

Benefits

Expands market reach by catering to previously underserved or overlooked segments
Transforms products into holistic solutions that support customers at every phase, moment, and touchpoint of their journey
Reduces customer friction by addressing barriers and pain points throughout the entire journey
Creates potential for new and recurring revenue streams through innovative supplementary services
Increases switching costs and reduces customer churn
Builds strong, lasting relationships that enhance NPS, increase CLV, and drive loyalty
Encourages innovation in value creation, value co-creation, and value facilitation (see my blog post Get the balance right! • 2)
Drives differentiation and builds brand equity

See also

Solutions > Products
Journeys > Transactions
Individualization > Standardization
Members > Audiences

The Connection Over Isolation strategy will be covered in the next blog post.

References

Bau, R. (2006). Design av tjänster och upplevelser [Design for services and experiences]. Part of Executive education in Design Management [unpublished training material]. Berghs School of Communication.

Bau, R. (2010, December). Ten strategy paradoxes in service Innovation and design. Paper presented at ServDes 2010 (Service Design and Innovation Conference), Linköping, Sweden.

Bau, R. (2011, December). Strategy paradoxes in service innovation and design. In: Cai et al. (Eds.), Design Management: Toward a new era of innovation. Proceedings from the 2011 Tsinghua-DMI International Design Management Symposium, Hong Kong, China. IDMA.

Bau, R. (2015). Thinking services instead of products. In: Service Design Boot Camp, Day 1 [unpublished training material]. Veryday.

Robert Bau 1/1/25 Robert Bau 1/1/25

Let’s (not) get (too) physical, physical • 4

Thinking services instead of products: Journeys > Transactions

While the shift from products to services – often referred to as servitization – is far from new, it remains a powerful framework for manufacturing companies and digital-first startups looking to embrace customer-centric, service-dominant business models. In this blog post, I explore the Journeys Over Transactions strategy, one of seven ways to think services instead of products.

4. Journeys > Transactions

The Journeys Over Transactions strategy is about empowering customers across every phase, moment, and touchpoint in their journey (i.e., value creation process). It shifts the emphasis from providing products (value delivery) to equipping customers with the tools and support they need to ‘get the job done’ and achieve desired outcomes (value facilitation, value co-creation, and value creation). See my blog post Get the balance right! • 2 for a deeper dive into this topic.

The customer journey can be mapped at different altitudes – from 30,000 feet (the broader experience ecosystem) to 500 feet (microinteractions within a touchpoint). Examining maps at specific ‘scales’ uncovers opportunities for new or enhanced supplementary services that empower customers in their value creation process. See my blog post about the Solutions Over Products strategy for an introduction to supplementary services and service packages.

In this discussion, I will focus on phases, moments, and touchpoints in the context of physical products (loosely based on Grönroos, 1990; Wirtz & Lovelock, 2016; Risdon & Quattlebaum, 2018; Bau, 2006, 2010, 2011, 2015, 2021: and Ulwick, 2005). The thinking applies to digital products as well, albeit with some adjustments to the terminology.

At 10,000 feet: Phases

The customer journey for tangible products typically unfolds across the following phases:

Learn & Buy: Customers gather information, explore options, make purchase decisions, complete payment, and arrange for delivery or collection.
Use & Adapt: Customers install, utilize, explore, and adapt the product.
Own & Maintain: Customers protect, preserve, and upgrade the product (through actions like storage, upkeep, repairs, and updates).
Repurpose, Resell, or Recycle: Customers extend the lifecycle of the product or its components.
Troubleshoot: Customers address and resolve issues that arise at any point of the journey.
Advocate: Customers share their experiences and promote the product/brand at any point of the journey.

Power tip: At this altitude, determine customer jobs (core, emotional, social) or goals (functional, emotional, self-expressive, social) for each phase. This will make it easier to uncover unmet needs and identify opportunities for supplementary services.

Note: I am intentionally using ‘phase’ rather than the more common ‘stage’ to emphasize overlapping or fluid periods within a journey. Phases highlight multiple activities or experiences that may occur simultaneously or cyclically, whereas stages imply a linear process with distinct transitions between steps.

At 5,000 feet: Moments

Each phase comprises of one or more customer moments. From the customer’s perspective, each moment represents a significant stepping stone toward reaching their goals, whether at a phase or journey level.

Examples of moments in each phase:

Learn & Buy: Searching for information. Comparing, customizing, and evaluating options. Deciding on the best fit. Exploring financing options. Completing payment. Arranging delivery or collection.
Use & Adapt: Receiving and inspecting the delivery. Unboxing and examining the product. Installing or setting up the product. Exploring features and functionalities. Using the product. Adapting the product to specific needs.
Own & Maintain: Storing the product. Protecting the product from damage. Monitoring usage and performance. Performing regular maintenance. Resolving issues. Replacing consumables. Upgrading to enhance performance or functionality.
Repurpose, Resell, or Recycle: Repurposing the product. Reselling the product. Recycling the product responsibly.
Troubleshoot: Identifying an issue. Resolving the issue (DIY or guided). Seeking professional support.
Advocate: Writing reviews or feedback. Recommending the product to others. Showcasing use on social media or community platforms.

Reflecting a customer-first approach, customers may engage solutions from multiple brands throughout the journey to ‘get the job done.’

Power tip: At this altitude, include internal and external triggers in your journey map to illustrate what prompts customers to take action. Triggers draw attention to unmet, underserved, or overserved needs and can arise at any point in the customer journey, not just at the beginning. Examples include replacing a broken product, buying a gift, receiving a recommendation, noticing signs of wear and tear, facing challenges during setup, or learning about a trade-in program.

At 2,500 feet: Touchpoints

Each moment is shaped by multiple touchpoints that work together to create a seamless and cohesive experience. These touchpoints facilitate interactions between the customer and the product or brand.

In the context of physical products, examples of touchpoints during the moment ‘Searching for information’ may include online reviews on CNET, conversations with colleagues, product pages on Amazon, customer service hotlines, in-store displays at Best Buy, and product packaging. In this moment, customers often zig-zag between channels and leverage multiple touchpoints to reach their goals, especially in high-involvement purchases (Rossiter & Percy, 1987).

The critical roles touchpoints play within the moment or across multiple moments:

Role 1: Facilitate interactions between the customer and the product (e.g., touch-sensitive interface)
Role 2: Facilitate interactions between the customer and the brand or organization (e.g., live chat)
Role 3: Connect the customer with third parties pivotal to the overall experience (e.g., real-time delivery tracking)
Role 4: Enable interactions between the customer and other users or communities (e.g., online forum)
Role 5: Help the customer transition smoothly from one touchpoint or moment to another (e.g., SMS notifications)
Role 6: Assist the customer to recover effectively from problems or disruptions (e.g., self-service diagnostic tool)

Touchpoints can be categorised in various ways, such as:

Tangible vs. Intangible: Printed product brochure vs. product tutorial video
Analog vs. Digital: Printed user guide vs. interactive setup instructions on a mobile app
One-way vs. Two-way: In-store product display vs. real-time conversation with a customer service representative
Permanent vs. Ephemeral: Branded storefront vs. one-time SMS notification
Static vs. Dynamic: Product packaging (fixed, unchanging) vs. personalized recommendations on an app (adaptive, evolving)
Proactive vs. Reactive: Maintenance reminder (initiated by the organization) vs. conversation with customer support (initiated by the customer)
Functional vs. Emotional: Troubleshooting guide vs. thoughtfully designed packaging (for the unboxing experience)
In-control vs. Out-of-control: Company-owned help desk vs. third-party reviews
Branded vs. Non-branded: Physical product vs. community forum

Power tip: At this altitude, focus on touchpoints rather than channels or media. Touchpoints are more granular, representing specific interactions between the customer and the product or organization. For example, within a mobile app, touchpoints might include product descriptions, checkout, and push notifications. Adopting a touchpoint-first approach makes it easier to uncover pain, friction, and pleasure points throughout the journey, which in turn helps identify opportunities for supplementary services.

Benefits

Transforms products into holistic solutions that support customers at every phase, moment, and touchpoint of their journey
Reduces customer friction by addressing pain and friction points across the entire journey
Strengthens emotional connections by positioning the organisation as a trusted partner at every step of the journey
Increases switching costs and reduces customer churn
Builds strong, lasting relationships that enhance NPS, increase CLV, and drive loyalty
Extends the product lifecycle through refurbishment, repairs, repurposing, buy-back schemes, etc.
Creates potential for new and recurring revenue streams
Encourages innovation in value creation, value co-creation, and value facilitation (see my blog post Get the balance right! • 2)
Drives differentiation and builds brand equity

See also

Solutions > Products
Inclusion > Exclusion
Connection > Isolation
Circularity > Linearity

The Inclusion Over Exclusion strategy will be covered in the next blog post.

References

Bau, R. (2010, December). Ten strategy paradoxes in service Innovation and design. Paper presented at ServDes 2010 (Service Design and Innovation Conference), Linköping, Sweden.

Bau, R. (2015). Thinking services instead of products. In: Service Design Boot Camp, Day 1 [unpublished training material]. Veryday.

Bau, R. (2021). Strategy playbook for service design [unpublished playbook]. Design Partners.

Grönroos, C. (1990). Service management and marketing: Managing the moments of truth in service competition. Lexington Books.

Risdon, C. & Quattlebaum, P. (2018). Orchestrating experiences: Collaborative design for complexity. Rosenfeld Media.

Rossiter, J.R. & Percy, L. (1987). Advertising and Promotion Management. McGraw-Hill.

Ulwick, T. (2005). What customers want: Using Outcome-Driven Innovation to create breakthrough products and services. McGraw-Hill.

Wirtz, J. & Lovelock, C. (2016). Services marketing: People, technology, strategy (8th ed.). World Scientific Publishing.

Robert Bau 12/15/24 Robert Bau 12/15/24

Let’s (not) get (too) physical, physical • 3

Thinking services instead of products: Individualization > Standardization

While the shift from products to services – often referred to as servitization – is far from new, it remains a powerful framework for manufacturing companies and digital-first startups looking to embrace customer-centric, service-dominant business models. In this blog post, I explore the Individualization Over Standardization strategy, one of seven ways to think services instead of products.

3. Individualization > Standardisation

The Individualization Over Standardization strategy is about tailoring content, products, services, and experiences to meet the unique needs of individuals, groups, and organizations. This approach recognizes varying levels of customer engagement, ranging from high-effort, hands-on participation to low-effort, consent-driven interaction. (Based on Bau, 2006, 2010, 2011, 2015; Wirtz & Lovelock, 2016.)

Note: The varying levels of engagement align well with Grönroos’ distinction between enabling and relieving services. Enabling services support customers by providing them with the necessary resources, tools, or knowledge, or resources to perform tasks independently. Relieving services take over tasks on behalf of the customer, thereby reducing their workload and responsibility. (Grönroos, 1990)

This blog post explores five overlapping schools of thought in individualization:

From passive consumption to active participation
From one-to-many to one-to-one marketing
From mass production to mass customization
From point-of-purchase to post-purchase customization
From rule-based to real-time personalization

Note: Unlike a product-centric approach that often treats services as an afterthought, a genuine service design mindset integrates product-service systems, value co-creation, platform thinking, end-to-end experiences, and a multi-actor perspective into the conversation on individualization.

From passive consumption to active participation

Rooted in the concept of value co-creation, active participation means engaging B2C and B2B customers in the creation, production, and delivery processes as co-researchers, co-innovators, co-designers, co-producers, and co-marketers.

Organizations employ strategies like co-creation, participatory design, crowdsourcing, and open design (to name just a few) to facilitate this level of participation and engagement. Customers are no longer treated as passive recipients but embraced as active collaborators or prosumers. Value is no longer embedded in static products but realized through dynamic customer-provider interactions. See my blog post Get the balance right! • 2 for a deeper dive into this topic.

The implications are twofold. First, organizations need to design systems, platforms, services, and processes that enable customers to realize value within their specific contexts. Second, traditional creators – such as innovators, designers, engineers, and developers – must evolve into platform builders, curators, coaches, and facilitators to inspire and empower active participation.

When customers contribute their time, effort, and expertise, they invest emotionally in both the process and outcome, fostering a sense of ownership and personal accomplishment. They may also gain tangible benefits, such as cost savings, performance improvements, financial rewards, or exclusive access.

(Toffler, 1980; Grönroos, 1990, 2011; Gummesson, 1999; Prahalad & Ramaswamy, 2004; van Abel et al., 2011)

Examples: IKEA enables customers to collect, transport, and assemble furniture themselves, combining flat-pack design with self-service to make home furnishing more affordable and accessible (1956–present). Build-A-Bear Workshop empowers parents and children to create personalised stuffed animals together, making the process fun and memorable (1997–present). MyStarbucks Idea crowdsourced suggestions for new products, store experiences, and community engagement models (2008–2018). LEGO Ideas (formerly LEGO CUUSOO) invites fans to co-create new LEGO sets through collaborative submissions and voting (2008–present). GE Aviation’s TrueChoice™ suite offers tailored maintenance and operational solutions designed to meet the unique needs of aviation clients (2016–present). SAP’s Co-Innovation Labs (COIL) facilitate collaboration between SAP, customers, technology providers, and startups to co-develop customized solutions for specific industry challenges (2007–present).

From 1:many to 1:1 marketing

One-to-one marketing centres on building personalised, long-term relationships with individual customers by (a) learning their unique preferences and needs through each interaction, and (b) continuously tailoring offerings to their evolving expectations (Peppers & Rogers, 1993; Pine, Peppers & Rogers, 1995).

1:1 marketing involves four critical steps (slightly adapted from Peppers & Rogers, 1993):

Identify: Understand who your customers are by gathering detailed insights into their preferences, behaviours, and needs. Create a living profile for each customer – a memory that grows and evolves with every interaction – ensuring a deeper understanding of their unique journey over time.
Differentiate: Segment customers based on their lifetime value, profitability, and specific needs. Prioritize high-value customers and identify underserved groups to focus resources strategically.
Interact: Develop meaningful, personalised, and cost-efficient interactions across channels (e.g., email, social media, or in-person). Treat each interaction as a learning opportunity to identify customer preferences, uncover unmet needs, and predict future behaviours.
Customize: Use the knowledge gained to tailor content, products, services, and experiences to meet the specific needs of individual customers, ensuring relevance and fostering loyalty.

Technology plays a pivotal role – not only in collecting and analysing customer data to enable personalisation at scale but also in facilitating meaningful, tailored interactions that foster deeper customer engagement.

Examples: Amazon leverages its recommendation engine to offer tailored product suggestions and promotions based on individual browsing history, purchasing behaviour, and preferences (1995–present). Stitch Fix combines human stylists with AI to deliver curated clothing selections, learning from customer feedback to refine future recommendations and deepen personalization (2011–present). Spotify uses machine learning to generate personalized playlists like ‘Discover Weekly’ and ‘Release Radar,’ adapting dynamically to user listening habits and introducing new music tailored to their tastes (2008–present).

From mass production to mass customization

Mass customization offers a scalable approach to addressing individual customer needs by blending the cost efficiency of mass production with the flexibility of bespoke solutions. This is achieved through customer insight (identifying segment needs and sacrifice gaps), unbundling (breaking products, processes, and experiences into configurable components), modular design (designing standardized components and platforms), operational flexibility (leveraging advanced manufacturing and JIT inventory), customer integration (utilizing configurators, algorithms, predictive analytics, recommendation engines, and feedback loops), and human intervention (providing curation, coaching, and creative problem-solving). (Based on Pine, 1993; Pine, Peppers & Rogers, 1995; Normann, 2001.)

The four faces of mass customization (Gilmore & Pine, 1997):

Collaborative customizers conduct a dialogue with individual customers to help them articulate their needs and make customized solutions that fulfill those needs.
Examples: Paris Miki’s Mikissimes Design System engages customers in a dialogue to create personalized eyewear tailored to their specific needs (1994–present). Nike By You (formerly NIKEiD) enables customers to design customizable footwear tailored to their preferences (1999–present).
Adaptive customizers offer standardized solutions that are modifiable by customers post-purchase for different purposes or occasions.
Examples: Lutron’s programmable lighting systems allow customers to modify lighting settings for different purposes or occasions (2010–present). Tesla offers over-the-air, pay-to-unlock upgrades that provide access to additional features and functionality post-purchase (2012–present). WikiHouse provides open-source architectural designs and resources, enabling individuals and communities to construct sustainable, low-cost housing customized to their needs (2011–present).
Cosmetic customizers present standard solutions differently to different customers.
Examples: Coca-Cola’s ‘Share a Coke’ campaign replaces its iconic logo on bottles with personalized names, adding a personal touch while maintaining brand recognition (2011–present). Glossier’s skincare products come with sticker sheets, allowing customers to personalize the packaging (2014–present).
Transparent customizers make adjustments for individual customers without their explicit involvement or approval.
Examples: Hoteliers tailor room experiences for high-value, repeat customers by adjusting pillow types, pre-setting room temperatures, or adding fresh flowers upon arrival. Retailers adjust store layouts and feature locally sourced products to reflect regional preferences and seasonal demand.

Technology plays an integral role in enhancing the efficiency, efficacy, and scalability of mass customization – for example, by dynamically suggesting customized products or configurations based on customer behaviours, preferences, and real-time interactions.

From point-of-purchase to post-purchase customization

Post-purchase customization involves customers and communities modifying or personalizing solutions after purchase to better suit their needs – often in ways not originally intended by the manufacturer or service provider. Depending on the context, it may also be referred to as user innovation, product hacking, or post-purchase personalization (see, e.g., von Hippel, 2005).

Some companies resist post-purchase customization, citing concerns over intellectual property, brand integrity, or product safety; others support and embrace it by providing inspiration, DIY guides, tools, templates, interchangeable components, and digital upgrades.

Examples: IKEA Hackers is a community where enthusiasts share ideas for modifying and repurposing IKEA furniture into custom configurations (2006–present). Bethesda Softworks empowers players to customize and expand games like Skyrim and Fallout through its Creation Kit, fostering a vibrant modding community and extending game lifecycles (2011–present). GoPro supports user-led innovation through modular accessories and a community where customers create and share customized camera setups for unique filming needs (2004–present). Casio G-Shock owners personalize their watches by swapping out straps, bezels, and faceplates to create bold, customized designs, with third-party sellers and DIY enthusiasts fueling the market for custom components (2019–present).

From rule-based to real-time personalization (a.k.a. hyper-personalization)

Powered by AI-driven systems, hyper-personalization delivers highly relevant, context-aware offerings, interactions, and experiences that adapt in real time to individual behaviours, contextual needs, and environmental factors. It achieves this by analyzing structured data (e.g., demographics, purchase history, location, time of day, weather conditions) and unstructured data (e.g., browsing patterns, social media activity, sensor data, emotional cues) both historically and in the moment. (Based on Hayes & Downie, n.d.; Jaffery, n.d.; Rusiñol, 2023.)

True personalization delivers on five implicit promises that shape customers’ expectations (slightly adapted from Abraham & Edelman, 2024):

Empower me. Provide intuitive tools and experiences that simplify tasks, support decision-making, and help me achieve my goals.
Know me. Leverage contextual, real-time data to understand my preferences, behaviours, and intent in the moment.
Reach me. Optimize communications by delivering the right message, through the right channel, at the right time.
Show me. Deliver tailored content and recommendations that align with my interests, needs, and preferences.
Delight me. Anticipate my needs and exceed expectations with unexpected, value-added solutions or experiences.

Advanced AI capabilities – such as predictive analytics, natural language processing, conversational AI, and recommendation algorithms – drive the precision, adaptiveness, and responsiveness of hyper-personalization (Hayes & Downie, n.d.; Jaffery, n.d.; Rusiñol, 2023).

Examples:

Peloton leverages real-time data and AI to deliver adaptive fitness experiences that evolve dynamically based on user performance, preferences, and feedback (2012–present). To illustrate: After a high-intensity interval session, Peloton uses wearable data and user activity to recommend recovery rides and adjust future workouts for optimal performance and recovery.
BMW integrates AI-powered features within its iDrive system to personalise in-car experiences based on driver habits, preferences, and real-time contextual factors (2018–present). To illustrate: Upon entry, iDrive adjusts seat position, climate, and lighting automatically, while dynamically suggesting alternate routes or activating rain-adaptive settings based on live traffic and weather data.
Sephora employs AI to analyze customer preferences, past purchases, and skin tones to deliver hyper-personalized beauty experiences through its Virtual Artist app (2016–present). To illustrate: The app examines a user’s photo to recommend foundation shades matched to their complexion, and leverages purchase history and browsing behavior to suggest complementary products like setting powders or brushes.

Note: Hyper-personalization exemplifies low-effort, consent-driven engagement. Ethical considerations, transparent data practices, and explicit user consent are essential for avoiding biases, protecting user data, and building trust.

Benefits

Aligns offerings and experiences with customer needs, preferences, and priorities, ensuring relevance, meaning, and value
Fosters emotional connection by making customers feel uniquely understood and valued
Reduces effort by streamlining decision-making and offering solutions that adapt to evolving needs
Optimizes resource allocation by using customer data to target the right solutions at the right time
Builds strong, lasting relationships that foster brand loyalty, enhance NPS, and increase CLV
Enhances customer advocacy by staging experiences that motivate customers to share with others
Strengthens competitive advantage (over companies using traditional segmentation)
Drives continuous innovation by leveraging customer data, feedback, and modifications
Encourages innovation in value creation, value co-creation, and value facilitation (see my blog post Get the balance right! • 2)

See also

Access > Ownership
Solutions > Products
Journeys > Transactions
Members > Audiences

The Journeys Over Transactions strategy will be covered in the next blog post.

References

Abraham, M., & Edelman, D. C. (2024, November–December). Personalization done right: The five dimensions to consider – and how AI can help. Harvard Business Review.

Bau, R. (2010, December). Ten strategy paradoxes in service Innovation and design. Paper presented at ServDes 2010 (Service Design and Innovation Conference), Linköping, Sweden.

Bau, R. (2015). Thinking services instead of products. In: Service Design Boot Camp, Day 1 [unpublished training material]. Veryday.

Gilmore, J. H., & Pine, B. J. (1997). The four faces of mass customization. Harvard Business Review, 75(1), 91–101.

Grönroos, C. (1990). Service management and marketing: Managing the moments of truth in service competition. Lexington Books.

Grönroos, C. (2011). Value co-creation in service logic: A critical analysis. Marketing Theory, 11(3), 279–301.

Gummesson, E. (1999). Total relationship marketing: Rethinking marketing management from 4Ps to 30Rs. Butterworth-Heinemann.

Hayes, M., & Downie, A. (n.d.). AI personalization. IBM Think.

Jaffery, B. (n.d.). OmniaAI. Connecting with meaning: Hyper-personalizing the customer experience using data, analytics, and AI. Deloitte Canada.

Normann, R. (2001). Reframing business: When the map changes the landscape. John Wiley & Sons.

Palmer, A. (2011). Principles of services marketing (6th ed.). McGraw-Hill Education.

Peppers, D., & Rogers, M. (1993). The one to one future: Building relationships one customer at a time. Currency Doubleday.

Pine, B.J. (1993). Mass customization: The new frontier in business competition. Harvard Business School Press.

Pine, B.J., Peppers, D., & Rogers, M. (1995). Do you want to keep your customers forever? Harvard Business Review, 73(2), 103–114.

Prahalad, C. K., & Ramaswamy, V. (2004). The future of competition: Co-creating unique value with customers. Harvard Business Review Press.

Rusiñol, G. (2023, December 27). Navigating the future: The dynamics of hyper-personalization and AI in customer experience. Forbes Tech Council.

Toffler, A. (1980). The Third Wave. Bantam Books, 1980.

van Abel, B., Evers, L., Klaassen, R., & Troxler, P. (Eds.). (2011). Open design now: Why design cannot remain exclusive. BIS Publishers.

von Hippel, E. (2005). Democratizing innovation. MIT Press.

Wirtz, J. & Lovelock, C. (2016). Services marketing: People, technology, strategy (8th ed.). World Scientific Publishing.

Robert Bau 11/1/24 Robert Bau 11/1/24

Let’s (not) get (too) physical, physical • 2

Thinking services instead of products: Solutions > Products

While the shift from products to services – often referred to as servitization – is far from new, it remains a powerful framework for manufacturing companies and digital-first startups looking to embrace customer-centric, service-dominant business models. In this blog post, I explore the Solutions Over Products strategy, one of seven ways to think services instead of products.

2. Solutions > Products

The Solutions Over Products strategy shifts the focus from merely making and selling products to delivering holistic solutions that address the broader needs of customers (based on Bau, 2006, 2010, 2011, 2015; Wirtz & Lovelock, 2016). This suggests that companies should not define themselves by the products they produce but by the outcomes their customers seek (see, e.g., Levitt, 1960). Achieving this may require a networked approach, fostering collaboration across organizational boundaries to combine complementary resources, expertise, and capabilities for mutual benefit – including partnerships with universities, suppliers, customers, and even competitors (Kanter, 1994).

Examples: From selling cameras to capturing memories. From selling cars to improving mobility. From selling fitness equipment to fostering wellness journeys. From selling printers to managing documentation.

This blog post explores three key shifts at the heart of the Solutions Over Products strategy – from minimum viable products to augmented solutions, from core products to service packages, and from one-size-fits-all to tailored solutions. It wraps up with a curated list of my favourite approaches and frameworks for achieving a strong problem-solution fit.

Shifting from minimum viable products to augmented solutions

Value propositions should account for the potential expansion and evolution of the customer offering over time.

The core benefit (big idea) represents the fundamental benefit or purpose the product serves, addressing the intrinsic need for which customers seek a solution.
Example: The Oura Ring provides personalized health insights by trcking sleep, activity, and readiness. The core benefit is about empowering users to make informed decisions that enhance their daily performance and overall wellness.
The basic product includes the minimum viable set of features necessary to deliver the core benefit.
Example: The basic product is the lightweight and discreet wearable, equipped with sensors for heart rate, temperature, and movement tracking.
The expected product comprises all the standards and features that customers typically expect when purchasing the product; these expectations are shaped by past experiences, customer reviews, advertising, competitor offerings, technological trends, regulations, etc.
Example: Features users expect from a premium wearable include accurate tracking of key health metrics; an intuitive mobile app with data visualization and daily reports; durable and waterproof design suitable for everyday wear; a rechargeable battery with a multi-day lifespan; and seamless syncing with other health apps and devices.
The augmented product includes additional features, services, and benefits that go beyond customer expectations and drive differentiation.
Example: Unique, differentiating features include automatic activity detection, sleep optimization insights, a readiness score, real-time stress monitoring, guided relaxation, personalized content, and the user community called Oura Circles.
The potential product encompasses future enhancements and transformations that the product might undergo to attract new customers or retain existing ones.
Example: Future enhancements and expansions may include AI-powered predictive analytics, integration with other health and wellness applications, collaborations with corporate wellness programs, and customization options to tailor appearance and functionality.

Models and frameworks that unpack customer offerings in this way include the Whole Product concept by Geoffrey Moore (1990) and the Five Levels of a Product by Philip Kotler (1994).

Note: While the concept of a minimum viable product (MVP) is fundamental to incremental and iterative product development, it should arguably be anchored in a clear and ambitious long-term vision for the product or business. This approach aligns well with the principle of Think Big, Start Small, Scale Fast (popularized in the innovation space by Carroll, 2010). For an insightful discussion on the concept of MVP, including misconceptions and practical applications, please see Kniberg (2016).

Shifting from core products to service packages

Value propositions should encompass the tangible and intangible elements of the offering that empower customers in their value creation process.

The core product defines the solution customers are buying and the principal benefits they seek (the ‘what’ and ‘why’). The core product may be tangible, intangible, or a hybrid of both. Similarly, the benefits it delivers may be tangible (financial), intangible (non-financial), or a combination of both.
Example: Peloton is a premium fitness brand. The core product is the fitness equipment (Peloton Bike or Treadmill) with access to the on-demand library of live and recorded classes led by world-class instructors (accessed through equipment touchscreens or the Peloton app). Benefits include physical fitness, health improvements, convenience, motivation, and positive reinforcement.
Wrapped around the core product, supplementary services add significant value by facilitating and enhancing the usage of the product or consumption of the service. Examples of facilitating services include solutions for customer support, payment processing, delivery, and installation. Examples of enhancing services encompass solutions for personalization, training, loyalty programs, and concierge services (to name but a few). Supplementary services play a critical role not only for improving the customer experience and differentiating the offering from competitors, but also for addressing the unique challenges of marketing and managing services (such as intangibility, heterogeneity, inseparability, perishability, co-creation, and timeliness).
Example: Peloton’s facilitating services include professional delivery and installation, financing options, subscription management, customer support, warranty and protection plans, and integration with health tracking tools. Enhancing services include training programs, tailored class recommendations, customized metrics, branded gear, community engagement, exclusive member events, and loyalty programs.
The processes required to deliver both the core product and the supplementary services are guided by pre-defined service attributes and measurable service standards, ensuring consistent levels of quality and productivity across all encounters in the end-to-end experience. Service attributes – such as reliability, accessibility, responsiveness, credibility, empathy, and security – serve as guiding principles or benchmarks for designing touchpoints that consistently meet or exceed customer expectations.
Example: Peloton’s white glove delivery includes professional delivery, assembly, setup, and a demo in customers’ homes, offering a seamless start-to-finish experience with added convenience, reassurance, and peace of mind. Key service attributes may include reliability (ensuring services are consistently dependable and error-free), empathy (demonstrating care and understanding during customer interactions), and responsiveness (promptly addressing customer needs and concerns).

Models and frameworks that encapsulate the tangible and intangible elements of a service offering include the Service Package by Christian Grönroos (1990), the Three-Component Model by Adrian Palmer (2011), and the Flower of Service by Wirtz and Lovelock (2016). Additionally, the SERVQUAL model by Parasuraman, Zeithami, and Berry (1988) serves as a valuable framework for identifying the key attributes most relevant to a specific experience.

Shifting from one-size-fit-all to tailored solutions

Value propositions should demonstrate how offerings are tailored to meet the specific needs and preferences of segments, entities, and individuals.

Approaches include:

Focusing efforts on serving specific customer segments or niches that mainstream, mass-market service providers often overlook. (Porter, 1980; Wirtz & Lovelock, 2016)
Examples: Focused service offerings include Code First Girls (free coding courses for women globally); Crunchyroll by Sony Pictures (anime-only streaming service); DeHaat (agri-tech solutions & services to the farming community in India); FedEx Custom Critical (expedited service for specialized, valuable, and hazardous shipments); and BMW Individual (bespoke and exclusive customizations of BMW vehicles).
Using tiered services models to address diverse customer requirements and varying price sensitivities in both B2B and B2C markets. Tiering can be applied across all dimensions of the customer offering – core products, supplementary services, and delivery processes. (Wirtz & Lovelock, 2016) This aligns with the concept of ‘flexible’ customer offerings – wrapping optional services around naked solutions – which, in turn, supports flexible pricing models (Anderson & Narus, 1995).
Examples: Spotify’s tiered subscription model (Free, Premium Individual, Premium Duo, Premium Family, Premium Student). Delta Air Lines’ tiered loyalty programs (Silver Medallion, Gold Medallion, Platinum Medallion, Diamond Medallion). Microsoft’s tiered support system (Standard Support, Professional Direct Support, Premier Support).
Encouraging active participation in the specification, creation, production, delivery, and marketing of customer solutions to facilitate deep customization and personalization. See my blog post about the Individualization > Standardization strategy.
Dynamically adjusting offerings and delivery systems to respond to customer needs in real time. See my blog post about the Individualization > Standardization strategy.

Ensuring a good problem–solution fit

To create solutions that truly resonate with customers, businesses must focus on understanding the problems customers are trying to solve and the outcomes they are striving to achieve.

Competing/complementary approaches to ensure a good problem-solution fit include:

Jobs to Be Done (JTBD). A framework for understanding (a) the functional, emotional, and social jobs customers are trying to accomplish, (b) the steps they take to achieve these jobs, and (c) the products, services, and tools they ‘hire’ to get the job done. Integral to the Outcome-Driven Innovation methodology, JTBD helps identify underserved or overserved needs and guides the development of solutions that address these gaps. (Ulwick, 2005)
Seeing products in motion. Thinking of products in terms of verbs rather than nouns can reveal unexpected problems or opportunities. This means shifting the focus from static objects, products, or spaces (what they are) to dynamic activities, processes, experiences, or outcomes (how they are used and what they enable). (Kelley, 2001) For example, reimagining a chair as ‘sitting,’ a water bottle as ‘drinking,’ a car as ‘driving,’ and a classroom as ‘learning’ opens up new possibilities for enhancing or rethinking end-to-end experiences.
Design thinking. A people-first mindset, methodology, and toolkit for identifying the right problems to solve and determining the best ways to solve them, based on the principles of divergence and convergence. The process typically involves the following phases (or variations thereof): Frame a Question, Gather Inspiration, Generate Ideas, Make Ideas Tangible, Test to Learn, and Share the Story. (IDEO U, 2024; Design Council, 2007; Brown, 2008) See also my blog post Lean & mean innovation machine • 2.
Value Proposition Design. A framework for creating alignment between the Value Map, which represents what the business offers (core offerings, pain relievers, gain creators), and the Customer Profile, which represents what the customer needs (jobs, pains, gains). This approach ensures the customer offering directly addresses customer needs, resolves pain points, and delivers added value. (Osterwalder et al., 2014)
Customer Development. A methodology for building and scaling startups based on four iterative steps. Customer Discovery: Identifying and validating a significant problem that customers are willing to pay to solve. Customer Validation: Ensuring the proposed solution effectively addresses the problem and customers are willing to pay for it, ideally by developing and testing a minimum viable product (MVP). Customer Creation: Generating demand for the validated product through targeted marketing and outreach. Company Building: Transitioning from a discovery-focused startup to a scalable business with established processes and teams. (Blank, 2005) See also my blog post Lean & mean innovation machine • 2.
Other interesting approaches include Blue Ocean Strategy (Kim & Mauborgne, 2005), Solution Selling (Eades, 2003), Mass Customization (Pine, 1993), and One-to-One Marketing (Peppers & Rogers, 1993).

Benefits

Addresses the specific requirements, expectations, and price sensitivities of various segments, entities, and individuals
Aligns offerings with customer priorities, ensuring solutions feel meaningful and valuable
Offers richer and more engaging customer experiences by combining tangible and intangible elements
Ensures consistency across all encounters with the brand or service
Sets realistic customer expectations, reducing the gap between expected and perceived service
Fosters customer trust, satisfaction, and loyalty
Builds strong, lasting relationships, enhancing NPS and CLV
Drives brand differentiation in crowded markets
Supports flexible pricing strategies
Facilitates upselling and cross-selling
Creates potential for new and recurring revenue streams
Encourages innovation in value creation, value co-creation, and value facilitation (see my blog post Get the balance right! • 2)

See also

Access > Ownership
Individualization > Standardization
Journeys > Transactions

The Individualization Over Standardization strategy will be covered in the next blog post.

References

Anderson, J.C., & Narus, J.A. (1995). Capturing the value of supplementary services. Harvard Business Review, 73(1), 75-83.

Bau, R. (2010, December). Ten strategy paradoxes in service Innovation and design. Paper presented at ServDes 2010 (Service Design and Innovation Conference), Linköping, Sweden.

Bau, R. (2015). Thinking services instead of products. In: Service Design Boot Camp, Day 1 [unpublished training material]. Veryday.

Blank, S. (2005). The four steps to the epiphany: Successful strategies for products that win. K&S Ranch.

Brown, T. (2008, June). Design thinking. Harvard Business Review, 86(6), 84–92.

Carroll, J. (2010, May). Innovation: Think big, start small, scale fast. Jim Carroll.

Design Council. (2007). Eleven lessons: Managing design in eleven global brands. Desk research report. Design Council, UK.

Eades, K. M. (2003). The new solution selling: The revolutionary sales process that is changing the way people sell. McGraw-Hill Education.

Grönroos, C. (1990). Service management and marketing: Managing the moments of truth in service competition. Lexington Books.

IDEO U. (2024). Design thinking.

Kanter, R.M. (1994). Collaborative advantage: The art of alliances. Harvard Business Review, 72(4), 96-108.

Kelley, T. (2001). The art of innovation: Lessons in creativity from IDEO, America’s leading design firm. Currency/Doubleday.

Kim, W.C., & Mauborgne, R. (2005). Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant. Harvard Business School Press.

Kniberg, H. (2016, January). Making sense of MVP (Minimum Viable Product) – and why I prefer Earliest Testable/Usable/Lovable. Crisp.

Kotler, P. (1994). Marketing management: Analysis, planning, implementation, and control (8th ed.). Prentice Hall.

Levitt, T. (1960). Marketing myopia. Harvard Business Review, 38(4), 45-56.

Moore, G. A. (1991). Crossing the chasm: Marketing and selling high-tech products to mainstream customers. HarperBusiness.

Osterwalder, A., Pigneur, Y., Bernarda, G., & Smith, A. (2014). Value proposition design: How to create products and services customers want. Wiley.

Palmer, A. (2011). Principles of services marketing (6th ed.). McGraw-Hill Education.

Parasuraman, A., Zeithaml, V.A., & Berry, L.L. (1988). SERVQUAL: A multiple-item scale for measuring consumer perceptions of service quality. Journal of Retailing, 64(1), 12-40.

Peppers, D., & Rogers, M. (1993). The one to one future: Building relationships one customer at a time. Currency Doubleday.

Pine, B.J. (1993). Mass customization: The new frontier in business competition. Harvard Business School Press.

Porter, M.E. (1980). Competitive strategy: Techniques for analyzing Industries and competitors. Free Press.

Ulwick, T. (2005). What customers want: Using Outcome-Driven Innovation to create breakthrough products and services. McGraw-Hill.

Wirtz, J. & Lovelock, C. (2016). Services marketing: People, technology, strategy (8th ed.). World Scientific Publishing.

Robert Bau 9/1/24 Robert Bau 9/1/24

Let’s (not) get (too) physical, physical • 1

Thinking services instead of products: Access > Ownership

While the shift from products to services – often referred to as servitization – is far from new, it remains a powerful framework for manufacturing companies and digital-first startups looking to embrace customer-centric, service-dominant business models. In this series of blog posts, I have refreshed vintage content with repackaged strategies and new examples to help leaders, innovators, and designers transform customer offerings and experiences for the future.

Seven ways to think services instead of physical and digital products:

Access > Ownership. Enabling access to assets and resources without the burdens of ownership.
Solutions > Products. Delivering holistic, outcome-focused solutions that address the broader needs of customers.
Individualization > Standardization. Tailoring content, products, services, and experiences to meet the unique needs of customers.
Journeys > Transactions. Empowering customers in their value creation process across every moment and touchpoint.
Inclusion > Exclusion. Removing barriers that prevent individuals and groups from engaging with products and brands..
Members > Audiences. Building vibrant, connected communities around interests, practices, and products.
Circularity > Linearity. Encouraging circular mindsets and business models that support broader sustainability goals.

Note: These strategies are not mutually exclusive or collectively exhaustive (MECE), which is intentional. Think of them as lenses through which to explore opportunities to transform customer offerings and experiences – an approach that proves highly effective in ideation sessions.

1. Access > Ownership

The Access Over Ownership strategy empowers B2B and B2C customers to experience, utilize, and benefit from assets and resources without the burdens and costs associated with ownership. The focus shifts from value exchange and take-make-dispose models to value-in-use, circular behaviors, and collaborative consumption. (Based on Bau, 2006, 2010, 2011, 2014, 2015; Wirtz & Lovelock, 2016; Botsman & Rogers, 2010; Buczynski, 2013; Jégou & Manzini, 2008.)

Note: In this context, assets refer to physical items (vehicles, machinery, real estate, etc.) and digital assets (software, data, digital content, etc.). Resources encompass these assets along with intangible elements such as expertise, time, and network access. In outcome-driven innovation, resources are tools or means that enable customers to perform tasks, ‘get the job done,’ and achieve their desired outcomes.

Service models

B2C2C peer-to-peer sharing models empower individuals to share their own assets and resources – such as homes, cars, tools, or skills – with others in exchange for a fee, or for free in a bartering system where goods or services are exchanged directly. In this setup, enabling platforms typically serve as intermediaries, connecting users, managing transactions, and fostering a sense of community.
Examples: Turo – car owners rent out their personal vehicles to others through Turo’s car-sharing marketplace; TaskRabbit – locals offer their skills and time to perform various tasks, such as home repairs or furniture assembly, for a fee; community-based collaborative services – community members engage in micro-initiatives such as bicycle self-repair workshops, family-run micro-nurseries, and home laundry services.
B2B P2P sharing models enable businesses to share their own assets and resources – including vehicles, facilities, equipment, tools, and even manpower – with other businesses for a fee. Platforms play a crucial role by facilitating connections, managing transactions, and fostering collaboration, networking, and knowledge sharing.
Examples: Floow2 – businesses share equipment, office space, and even staff with other companies; LiquidSpace – businesses rent out unused office space to other companies, freelancers, or startups on a short-term basis; Cohealo – healthcare facilities share medical equipment with other institutions, optimizing the use of expensive resources.
B2C rental, leasing, and subscription models provide individuals with access to high-value assets and resources, sometimes bundled with services like customer delivery, onboarding, and support to boost productivity and address potential issues.
Examples: Rent the Runway – customers rent designer clothing and accessories for a specific period, returning them after use; Netflix – subscribers gain access to a vast library of movies and TV shows, streaming content without the need for ownership; Zipcar – users rent cars by the hour or day, gaining access to vehicles without the costs of ownership.
B2B rental, leasing, and subscription models allow businesses to access high-value assets and resources, often bundled with services like delivery, setup, installation, training, maintenance, optimization, and expert support to boost productivity and maximize value-in-use.
Examples: Salesforce – businesses subscribe to Salesforce’s CRM software, which includes ongoing updates, support, and customization options; WeWork – companies lease office spaces and enjoy bundled services like high-speed internet, cleaning, and community events; Cisco Systems – companies lease networking equipment from Cisco, which includes maintenance, setup, and ongoing support.
Resource pooling brings together groups of people or businesses to share or jointly access resources. Through collaboration, these groups can collectively strengthen their bargaining power to negotiate more favorable terms or secure preferential treatment.
Examples: WeWork Labs – startups share office space and resources, benefiting from networking opportunities and shared services; Gartner Peer Connect – businesses pool their knowledge and expertise, sharing best practices and industry insights within the network; community solar projects – groups of individuals or businesses invest in shared solar energy installations, pooling resources to generate renewable energy and reduce energy costs.
On-demand access allows people or businesses to instantly obtain assets and resources as needed, paying only for what they use at the moment, without any long-term commitment.
Examples: Uber – users request rides instantly, paying only for the service they need at the moment without any long-term commitment; AWS (Amazon Web Services) – businesses access cloud computing power on-demand, scaling up or down based on their immediate needs; Blue Apron – customers order meal kits on-demand, choosing from a variety of recipes, with no commitment to ongoing subscriptions, allowing them to cook at home only when they need it.
Freemium models offer basic features for free, but once upgraded, they often allow multiple users, like project teams or households, to share access.
Examples: Spotify Family Plan – lets multiple household members share a single premium music streaming account, allowing each person to have their own playlists and recommendations; Google Workspace – allows users to work together and create content in real-time, with paid upgrades for additional storage, advanced collaboration features, and increased user access; Zoom – offers free video conferencing, with paid upgrades for hosting larger meetings and accessing additional collaboration features.

Note: P2P sharing models are typically shorter-term and less formalized than rental, leasing, and subscription models.

Benefits

Democratizes access to high-value assets and resources by enhancing accessibility and affordability
Eliminates the hassle, responsibilities, and costs associated with ownership (e.g., upfront capital, storage, maintenance, repairs, upgrades, and disposal)
Provides flexibility and freedom to adjust, scale, or discontinue usage/consumption as needs change over time
Aligns with the trend of prioritizing experiences over possessions
Maximizes resource utilization through continuous use and reuse
Monetizes underutilized assets or resources, turning them into revenue-generating opportunities
Reduces the demand for the production of new tangible goods
Reduces carbon footprint and minimizes environmental impact
Fosters a sense of community by connecting users who share similar needs or values
Encourages innovation in value creation, value co-creation, and value facilitation (see my blog post Get the balance right! • 2)
Drives differentiation and builds brand equity

See also

Solutions > Products
Inclusion > Exclusion
Members > Audiences
Circularity > Linearity

The Solutions Over Products strategy will be covered in the next blog post.

References

Bau, R. (2010, December). Ten strategy paradoxes in service Innovation and design. Paper presented at ServDes 2010 (Service Design and Innovation Conference), Linköping, Sweden.

Bau, R. (2014). Sharing & caring across generations. Breakout session at Service Design Global Conference, Stockholm, Sweden. [Unpublished]

Bau, R. (2015). Thinking services instead of products. In: Service Design Boot Camp, Day 1 [unpublished training material]. Veryday.

Botsman, R & Rogers, R. (2010). What’s mine is yours: The rise of collaborative consumption. HarperCollins.

Buczynski, B. (2013). Sharing is good. How to save money, time and resources through collaborative consumption. New Society Publishers.

Jégou, F. & Manzini, E. (2008). Collaborative services: Social innovation and design for sustainability. Edizioni POLI.design.

Wirtz, J. & Lovelock, C. (2016). Services marketing: People, technology, strategy (8th ed.). World Scientific Publishing.

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Let’s (not) get (too) physical, physical • 5

5. Inclusion > Exclusion

Let’s (not) get (too) physical, physical • 4

4. Journeys > Transactions

Let’s (not) get (too) physical, physical • 3

3. Individualization > Standardisation

Let’s (not) get (too) physical, physical • 2

2. Solutions > Products

Let’s (not) get (too) physical, physical • 1

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