Products vs. Services

Market View

John D. Sanders, Ph.D.,

"Products vs. Services"

What an interesting period of time we live in! Technological developments with new products and services are daily reducing much of our mental and physical labor requirements, changing our habits, and creating exciting new career and business opportunities.

Every technologist and venture investor (and federal lab applications specialist) is looking to back the new product that will burst upon the scene and explode with recognition, revenues and profits. Success doesn't happen often, which is why it makes news when quick positive results come forward (and why Wall Street bids up the price of the stock of an apparent winner). Even most good products just don't succeed without strong capital support, continuing development, and services integration over time.

Just what do I mean by services integration? In fact, in today's world there is a broadening gray area in defining what is a product and what is a service. Let me quote an example of this gray area: An attorney who prepared the first will of her career earns hourly fees from the time involved. The second will takes considerably less time because of the knowledge and experience gained in preparing that first one. By the fifth will, the preparation has nearly become "a product" because most of the preparation comes off the word processor and her experience provides the answers for the previously difficult situations. So, is that fifth will still a service or has it nearly become a product?

What about tax preparation software? Most of us now either buy a product off the shelf and use our home computers, or, we pay an organization to take our data and produce the final tax return with a combination of using that same product and integrating it with knowledge and experience to perform a service. Where is the profit earned for that tax preparation service? Is it in having access to the off-the-shelf product, or is it earned by the integration of knowledge and experience with technology developments?

Let's expand this discussion to a current movement in the market. A year or so ago only a few highly trained people could develop a "web homepage" for Internet use. What's happening? How many thousands of web homepages are now in use? Where's the value-added in this process? Is the value in knowing the technology of the web, in understanding the programs that allow for labor reduction in producing that new web homepage, or in the knowledge and experience of knowing how to best interact with the user- and then translating that knowledge and experience into the design? Has the development now reduced the web homepage production to a process where the technology is "transparent." The designer needs virtually no technical knowledge. The big money is in the services, but the profit is made when those services are honed to have the form of a product where there is a multiplier on time and effort. A staggering number of new businesses are being formed daily to provide services related to the Internet.

I recently sat in on a meeting of judges to pick the best new products currently being introduced into the information technology systems-integration industry. One could argue that the newer products are forcing standardization of the industry. But, "plug and play" always seems to be nearly in our grasp, remaining just a few steps beyond. For each new product that is introduced into the market, there is an ever increasing need for more knowledgeable and experienced personnel to be able to effectively and efficiently integrate it for the users. Thus, new "products" are creating new "services"- and vice versa.

I'm not sure there is any earth-shattering conclusion from this discussion. But, there is a reminder to not be infatuated with thinking that technology development must produce a "product." Integrating the ingredients of knowledge, experience and market savvy with new technology developments are opening up ever-increasing numbers of business opportunities all sizes of enterprises from individual entrepreneurs to major corporations.

I would appreciate comments; contact me at Technology Transfer Business magazine: phone: 703-848-2800, ext. 151; fax: 703-848-2353; e-mail: jsanders@technews.com.

prepared for the May, 1996 Issue of the Federal Laboratory Consortium NewsLink