Carter memo

May 2, ’12 4:02 PM

One of the principal calls for actions in the 2011 memo issued by the United States Deputy Secretary of Defense Dr. Ashton Carter; a clarion call for DOD and industry to come up with better ideas on how cut waste in the roughly $200 billion spent annually on services!

Dr. Carter really nailed the issue: efficient procurement won’t save the day if a government agency doesn’t know what it’s buying in the first place. Evaluating service contracts & offers purely on surrogate measures of value such as SLA metrics may be necessary but not sufficient!

Why is design#code excited about this?

design#code blueprints can be used to generate next-generation RFP for compact, flexible & performance-based service contracts that give the US federal government “Better Buying Power”.

Government agencies such as the DOD should develop the UNFOLD canvas and put it at the heart of an RFP. Bidders respond with the FOLD canvas and substantiate their claims on how they will deliver the particular set of outcomes and experiences defined in the UNFOLD. Everybody wins. (Of course someone always loses).

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Three little pigs

May 2, ’12 4:00 PM

Systematic definition of rich and robust value propositions based on customer outcomes; not surrogate measures i.e. SLA targets & benchmarks.

Clear and concrete definition of exactly how, when and where value will materialize for customers in terms of specific outcomes, activities & constraints.

With user experience designed to “package and protect” customer outcomes; so that the value purchased is the value delivered and consumed.

 

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What is a service?

May 2, ’12 3:55 PM

A guaranteed set of outcomes & experiences, delivered by the rendering of a needy customer asset or by providing access to a needed resources at a particular place & time.

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Challenges are opportunities

May 2, ’12 3:35 PM

More kinds of value than ever are expected to be packaged and delivered as services, accelerated by mega-trends such as ‘cloud’.

Services have always been the way to deliver some types of value, but new delivery and pricing models are disrupting incumbents. 

Some service providers thrive while others thrash about in financial & existential despair, unable to make bold and imaginative moves.

Governments are under pressure to deliver services at lower costs without forcing compromises on citizens & taxpayers and agencies have less flexibility & freedom than commercial enterprises and yet face certain expectations & mandates.

CHECK FOR SHIFT  >>>>

¨Shrinking budgets with growing consumption”
¨Customers want to own less and ‘rent’ more; they want services”
¨Major shift in demand patterns driven by cloud and mobile”
¨Persistent customer dissatisfaction even after hitting SLA targets”
¨New types of failures & incidents showing up on Service Desk charts”
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Net value

Jan 26, ’12 7:39 AM

The need for a service materializes in the context of activities and conditions that generate outcomes for customers; and the commitments and constraints that get in the way. For example, a marketing team at a car company needs to quickly print and distribute a catchy idea on high-quality color posters, for a sales campaign across its dealership network. But when they cannot do that, with the capabilities and resources on hand, they create the need for a service.

The need is expressed in terms of customer assets to be rendered to a particular state (e.g. posters printed and laminated) or in terms of ready access to a resource (e.g. photocopiers on rent) that is valuable at a particular place, platform or time. Service capabilities and resources, under the ownership and control of the service provider, engage and interact with customer assets to produce outcomes and experiences.

If services are products and customer outcomes are the goods they deliver, then customer experience measures the quality of goods. Users interact with the service provider’s agents, facilities, platforms and infrastructure, and participate in the delivery process to receive the purchased value. They also suffer the consequences of delays, errors and failures; or pains.

NET VALUE = (GAIN + LOSS) – (PLEASURE / PAIN) * PRICE

Net value is the algebraic sum of outcomes and experience. Outcomes are made of gains made and losses avoided (- loss). Experience is  Customers are sold on expected pain, which includes the purchase price and a reasonable effort they make to cooperate and participate. The simple goal of design is to increase NET VALUE by maximizing gains and minimizing pains.

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Outcomes or Experience?

Jan 26, ’12 7:27 AM

Outcomes are the value customers purchase when they buy services. Experience enhances or diminishes that value. Of course, in the case of some services, the experience is itself the outcome, but even in those cases the experience of getting the experience is defined separately.

In other words, regardless of how much experience plays a role in determining the value a customer gets from a service, outcomes still define the very need for the service in the first place. When two service offerings offer exactly the same outcome, then the guaranteed experience defines the contest.

For years Verizon has attacked AT&T and others in the United States with the “Can you hear me now?” advertising campaign. AT&T fought back by suggesting customers can enjoy or pursue many more outcomes with all those wonderful “apps” on the iPhone (“There’s an app for that”). Verizon fought back with it’s cheeky “There’s a map for that” commercial which suggested they have better coverage across the map. AT&T protested. Verizon got the iPhone.

Utility and warranty. Outcomes and experience. Contents and packaging.

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CMYK

Jan 26, ’12 7:10 AM

There are thousands of different reasons why consumers and enterprises buy services but they all can be reduced to a combination of four primary needs, just like you can create an astounding array of colors from C, M, Y, K. The four needs are: Enhancement, Protection, Coverage & Leverage.

For the assets you own, you seek to enhance their utility to affect a gain or protect them to prevent a loss. Because of assets you DON”T own, you seek to cover a gap to prevent a loss, or simply seek leverage from having additional capacity. OWN/GAIN, OWN/-LOSS, RENT/-LOSS, RENT, GAIN. That’s CMYK.

OWN/GAIN. Gains from increase in the value-creating potential of customer assets from new and existing ways in which they are useful. The outcomes customers pay for the degrees of change or conversion rendered by the service into the assets to increase their value.

OWN/-LOSS. Losses prevented from the timely maintenance protection, recovery or repair of customer assets. Customers seek to avoid damage, depreciation or theft that could impair the full & proper use of their assets or depreciate their economic or social value.

RENT/-LOSS. Losses avoided from having assured access to resources in particular forms, periods, places & on platforms. Customers seek to avoid defaults, deficits or opportunity costs from capacity shortfalls or shortcomings in existing capabilities.

RENT/GAIN. Gains created from having assured access to resources in particular forms, periods, places & platforms. Customers pay for additional capacity or potential from enabling or enhancing their assets with the borrowed assets or resources on rent.

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Don’t buy a ¼ inch drill

Jan 26, ’12 7:09 AM

“People don’t want to buy a ¼ inch drill. They want a ¼ inch hole!”

That’s Harvard Business School professor Theodore Levitt urging everyone to think in terms of the outcomes and experiences are trying to fill, as a more dependable basis for net value. It applies to the purchase of artifacts, materials and services. It applies particularly well to service design. What do customers always want, even if they are not able to express it well? In the simplest of terms, they seek affect gains and prevent losses.

It could be that you’re a product manager who needs 50 copies of a document printed in color, matte-finish, duplex and stapled at the corner and ready for pick-up within an hour on the way to the airport.

Or it could be the reason you’re flying non-stop to San Francisco to New York on a 10:00 pm flight is because this week every hour counts as you move towards a product launch, and you cannot afford to lose six hours in the middle of a work day to travel. You will put on your seat-belt and get a few hours of sleep before landing in New York.

Or it could be that you’d lose the opportunity to make a great impression on a group of industry analysts if those product road-maps don’t come out beautiful on high-quality paper and perfect color to express your strategic outlook; if you try printing it the office laser printer as somebody suggested.

CMYK!

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Some goods are services

Jan 26, ’12 6:30 AM

The distinction between ‘goods’ and ‘services’ is decrepit and reactionary.  All economic goods are purchased for the utility they contain, with reasonable assurances on the value customers can readily extract. Some goods are in the form of artifacts. Others are in the form of services.

Artifacts are products of manufacturing systems, available for retail and wholesale purchase. Services are products of delivery systems in which consumption directly engages production. Consumer services are retail where the customer is also the consumer. Business services are bought by an enterprise for its agents, employees and customers to use.

The purchase of artifacts bestows material ownership that is not only readily accountable but also stocked, traded or transferred. You can buy a car, use it and sell it for a significant residual price. Mere ownership of artifacts may be of value; using or experiencing them being not necessary.

Outcomes, not ownership, are the basis of value received from services. Experience of the service is necessary to appreciate the value and measure the quality of outcomes. You cannot resell the outcomes or experience of a delivered service. Go ahead, try it in your head.

In some services, user experience personifies outcomes and is a direct measure of value. In other cases, outcomes are embedded in customer assets, or defined in terms of assured access to resources for rent. User experience can be a surrogate measure of customer experience.

The intangible value of outcomes from some services can be more durable than the value of highly tangible artifacts (e.g. insurance policy versus a bag of potatoes). Outcomes of certain services can be more tangible than the intangible value of certain durable artifacts (e.g. Getting a photograph printed versus owning a collectible item).

So, services and artifacts are simply two kinds of products packed with value. Actual value extracted by the customer from each kind can be just as tangible or intangible; durable or perishable; certain or variable; and just as easy or painful. What matters is how good the design is.

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