Rome yesterday, Paris today. Planes, trains and automobiles… I only have myself to blame and the TMF to thank! Anyway, I hope you can bear with me – here is my New Years “Rant and Pontificate”.
I began thinking about the difference between planes and trains and automobiles (preferring trains as I am neither a pilot nor an Englishman). My thoughts began to (re-)obsess on the difference between services (planes and trains) and goods (automobiles). Over the Christmas break, I began thinking about the new service industries and how they can have intriguing and yet clumsy business models at the same time. Business models in the modern goods industries – though admittedly less interesting – are far from clumsy and would make Deming proud. I am not sure what he would say about modern service industries.
Not to pick on Telecommunications – but I think that “content” based business processes helps me make my point. Neither the content owners nor the Telco’s aiming to sell their content have succeeded. On one hand content owners found the Telco’s to be torturous business partners and few successful deals were cut. On the other hand people refused to buy the content at anywhere near the price demanded.
Even if you could erase from history free content provided by YouTube, Internet Radio and Napster – I wouldn’t see things changing. People would still have found a way to purchase content directly from content owners. Service providers selling services they do not own have not been effective – or at least effective enough to compete with advertizing and goods based models (and I consider AppStores as a good based model.
Let me digress on advertizing based business models…
Google and Facebook ( G & F ) are really just the modern incarnations of the billboard – that huge sign on the side of the highway touting tourist traps, casinos and “Channel 7 Live Action News at 6” (I remember the highways in the US in the 1960’s before the big backlash against billboards - it was ugly and intrusive). The difference being is that G & F have “splacked” almost everything except the physical world with ads - your virtual versions of your local library, your kitchen bulletin board, your main street, your job board, your high school trophy case… And you have to know that VC’s are just waiting to invest in someone who discovers a new virtual wall on which to litter their ads (in hopes they are bought by the big boys for a huge premium).
We have to ask whether the value to society of the new “walls” erected by G & F is sufficient compensation for the harm the accompanying ads do to our “environment”. Moreover, by making every wall free (maps, academic articles, video clips…) and making them generic, they are crowding out organizations (private, charitable and community) who want to create unique “local” value. It’s like Holiday Inn bulldozing its own road to all the world’s beauty spots to build their hotels and then nailing personalized (aka creepy) advertisements to each cliff face and every other ancient Redwood.
There are some features of G & F that do foster communities – making it easier for virtual mom and pop shops and trade rags to sign up advertisers. But I need to be convinced that these indirect and direct ad models are not cannibalistic – incentivizing G & F to really allow them to thrive. In other words, is having Vimeo use Google to manage its ads sufficiently interesting to Google to allow it to co-exist with YouTube? Or will Google try to out beef up YouTube to outcompete Vimeo or just buy it outright. Advertizing business models thrive on scale just like any business…. Monopolization of cultural places from which ads can be hung is a natural outcome. Where are G & F leading us?
Oops…. Back to the subject at hand: service industries. My premise is that service industries are not as effective as goods industries. To be more precise: service industries are not as effective when there is a supply chain. For instance, telecommunications did well as long as they were both “producer and seller” but began to suffer when they had to resell services from other “providers”. Looking back at the 2001 Telco crash, not an inconsiderable part of the problem began with the collapse of pyramid like interconnection chains in simple voice.
There are a number of challenges that service industries face that their goods based equivalents do not. These may sound a bit theoretical, but bear me out:
The supply chain:
The cost model:
The contractual model:
The revenue models:
I probably chose the wrong example above with Content. The Cloud – very much a complex service flow - is a much better example and obvious to Telco readers. Services are very embedded, very immediate and very far from goods models. But service flows are popping up everywhere – here in the UK the AA is selling a hybrid “all you can eat” home repair service that is partly insurance and partly a resale of “a man and his van”. Bundled Financial services (BNYMellon) that mix transaction and non-transactional services are becoming more important. Energy firms are reselling alarm services. Alarm services companies (ADT) are providing energy management.
The question for me is whether the current conceptual framework used to build enterprise applications in the service industry is wanting. I suspect it is. We need to step back and look at billing, finance and planning business systems… how do we get them to address “value flows” where they now excel in “chains”?
Anyway… there goes my New Year’s resolution (at least I gave “Larry Rants” a break)…. So with that: “Prospero Nuevo Año”!