My Startup. Product or Service based?

Most of us, who were unfortunate enough to blow up our money in an MBA have been taught the difference between a product and a service. We have been taught sales accordingly.

Fortunately for me, I slept through that class… and most of my MBA.

So when I sat groggy-eyed a day before my semester exam, trying to understand the definitions and difference between selling both I was really confused.

So I mugged up stuff and passed the exam.

But due to my work with startups, I was forced to encounter reality on a daily basis during my MBA. The kind of reality which some in-house professors was oblivious to.

So what is a product? Something tangible you sell. And Service? Something intangible that you sell. Simple enough.

But that’s when the real confusion starts.

So now you have two divergent ways of selling a product and a service. And hence two different ways of selling stuff.

Now this made no sense to me. Simply because most of the stuff we sell today is a combination of both.

So how do we decide what is a product and what is a service? Hence is my startup, product or service based?

This may seem a simple question, but in my view without a good answer my startup can hit the shits.

 

My View

All of us will be better off if we realised that everything we sell, requires both a service and product mentality.

Why?

Well lets take a soap or box of pens. Now this is a commoditised product.

Make boxes of soap or pens. Package them. Distribute them. And sell them. Simple.

Now this is where the theory of product sales works just fine. In theory.

Someone forgot to tell us that you deal with retailers, agents, transporters, distributors and C&F agents. In many ways you service them. FMCG execs will give you a long hard look if you tell him otherwise. But then that’s a different story.

 

Now let’s go up the value chain. Let’s say that box of soaps were to become premium priced soaps in something like the Body Shop. And the pens were highly priced William Penn products. They are still products, but the amount of resources that go into the service part of the business has gone up exponentially. Like hiring of store managers, sales executives, buying software for billing, store music etc.

So what happened. As we went up the value chain, the line between a product and a service blurred. A sales theorist would be mighty confused.

 

Service – Let’s say like the guy who gives you a Head Massage under a Banyan Tree. He pats his hands on your head, maybe puts a finger in your ear and you give him money.

Up the value chain, one of those really upmarket Habib type Salons or Studios (Dunno why they call them that), If you end up using crappy shampoos, conditioners, scissors, hair color, wax etc your service really won’t amount to much.

 

How does it matter to a Startup?

Well because if you get into the game, thinking you are a product only or service only startup, you will never be able to go up the value chain. And that means either you are plunging towards a commoditized market or already in one.

Hence lesser profits, more market competition, more desperation and lesser valuation. Means no big paycheck.

And you also just left your high paying job for it!

Gamification. Last year’s most abused/exploited term.

If you haven’t heard about ‘Gamification’ till now then let me educate you.

Gamification, as defined by me, is the use of game mechanics, game design and game thinking to solve every day problems.

Its supposed to make stuff that we find hard, easy to do, by introducing elements of a game in it.

Examples of Gamification?

That linkedin bar on your profile which continuously indicates that you have only completed a certain % of your profile.

The awarding of badges on foursquare. And that meaningless irritating number (for twitter users primarily) called the Kluot Score.

Various disciplines of Human Physcology, Game Design, Intrinsic Motivation, Sociology, Organization Behavior etc all play a part in the substance behind this buzzword.

To know more. Google. Or wait for me to write Gamification 101.

For those of you, who have taken the pain to read this far and still don’t know what I am talking about. Please read the below line.

Microsoft, Facebook, Twitter, FourSquare, Google, Nike, Universal Studios, Linkedin, Hallmark, Salesforce, American Airlines and .. ahem.. Playboy are just some of the companies who have used Gamification successfully.

Still a little apprehensive?

“Gartner Group estimates that by 2015, 70% of the Forbes Global 2000 will be using Gamified apps”

I didn’t make that up.

The Problem?

Since this is a (dare I say science) new and evolving field of study, it has its share of issues.

The reasons are as follows

1. Just like the present swings in the stock market, most people have a vague idea of what it means, a few know what it does and almost no one knows where it’s headed. Including me.

2. Most intelligent, respectable, sober, law-abiding and highly placed people feel that this is just a fad and will go away soon enough. I am tempted to agree. However they said the same thing about Rap Music and that wonderful ear-grating, cocaine induced, profanity filled ‘music’ is still around. Alive and Kicking.

3. While its champions are successful and intellectual beings (See Dr. Amy Jo Kim, Ananth Pai, Rajat Paharia, Gabe Zichermann etc) the hordes are filled with Game Designers, Social Media Fanatics, Gamers, Advertising Types, Anti-Social Internet types and worst of all… Premier B-School Students.

4. While it may be said that the Airlines and Credit Card companies have been using Gamification for decades by introducing loyalty points, that’s like saying Gravity was discovered by the first caveman who dropped a rock on his foot to try and get his wife to stop nagging him. In both cases it was a desperate need and no great science was involved. Gamification is only a few years old.

5. A constant, creeping, broadening of the term is diluting its actual core. Like someone who recently said “Lets make school fun for children by giving them points for all the good stuff that they do”. And I said “Yeah? Like what?”. He said – “Like doing homework, reading up on your chapters, participating in sports, wearing a clean uniform, etc. A perfect example of Gamified learning.” I wanted to hit him on the head cause that’s called ‘Continuous Evaluation’ aka Long Bloody School Exam. Not fun.

6. No one has come out with a P/L statement that has 7 black ink figures under Gamification Services.

Due to the above reasons and more.

It is Last year’s most (drum roll…. trumpets… farting audience) abused/exploited term.

Stay tuned for more.

Flipkart and its Bomb/Earthquake/Apocalypse resistant packaging

I love Flipkart.

I have bought around 20 books from them over the past year and have another 70-80 lined up on my wishlist.

Their service is fantastic and they really follow the oft stated and almost never followed rule of customer delight

“Under-Promise and Over-Deliver”

 

They still have a few issues with how they run things. I sent them an email detailing all of them. Never got a reply. Wasn’t really happy about that.

But this post if not about the other issues.

It’s about their famed packaging. And while I appreciate the effort, I don’t like the end result.

I don’t know where they picked it up from and who thought of it, but I have a few major issues with it.

1. It’s really difficult to open it up/unpack it. I don’t relish wrestling with the book when all I want to do is to smell the fresh pages.

2. What purpose does it solve? I am sure it comes in contact with some not-so-gentle hands and machinery. But this isn’t really a 120 year old bone china tea set that I am trying to courier over the Atlantic.

3. You are ruining the environment!

 
I am sure there are tons of people who are extremely happy about their books being ‘Bomb/Earthquake/Apocalypse/Mother-in-law Resistant’. But could you do me a favor and send me lesser cardboard on my book. If you can’t do that for everyone (understandable) a little tick box could help us indicate the amount of packaging we want.

And could you get me in touch with your packaging & warehousing guys? I need to get my bomb shelter padded up for end 2012.