Of Things and Services: Why “Quality Products” Do Not Create Value

A keynote about the German fixation on making things better instead of people's contexts and lives

This is a talk, which Jan presented at 99U Local, 2015 in Dresden. It’s all about the German fixation on “making things better” instead of helping customers or users get their jobs done better. This was the announcement text:

“Many German companies are proud to know their internal value chain well, to optimize it permanently and to put a lot of love into their product. What they often overlook is that the customer also has a value chain. He integrates products and services [sic!] of other providers to provide a service [sic!] to other people or to himself. He will quickly replace product or service solutions that are not compatible with his everyday practice with those that serve him better.

People therefore never buy products in isolation, they always look for solutions that they can best embed in their value creation process. The form a solution takes to deliver its desired results rarely matters. Products are always a means to an end. Therefore, they always hire that product or service that can best get them their specific “job done” in their personal context of use. In other words: Users choose those solutions that can be best integrated into their current life situations and existing product-service ecosystems. If these solutions do as well or even better than human service providers or other products and machine services, they are more worth hiring than existing alternative solutions on the market.

Even in Germany, the country of machine worshippers, people don’t buy products, they look for solutions! Companies should know “which”, because the maxim holds true: “Before you build things right, build the right things first”!

Jan Schmiedgen, 99U Local, Dresden

Companies that think only in terms of goods, product categories or even “industries” therefore suffer from a narrow view (or marketing myopia). Their products alone do not create value. Many of the things that make up a good “quality product” in German terms can now be produced by manufacturers from the emerging economies of Southeast Asia. German — too goods-centric — manufacturers are therefore already experiencing a commoditization of their offerings on a broad scale. The recipe-like strategies (better key performance indicators, more features, more durable quality, better branding, “high price strategies”, production relocations, etc.) with which many then try to oppose this trend rarely stop this development. All the more, however, they expose the deeply rooted “product strategy thinking” that could become the Achilles’ heel of the German economy. One possible way out of this dilemma is a stringent service logic in business.

In his talk, Jan touches on why a goods-dominant economic logic dominates our minds but has never existed in reality. He advises companies that want to maintain their competitiveness to focus less on their competition and instead pay more attention to their customers and their lifestyles. The whole thing is illustrated with amusing practical examples – from baby oil to baking mixes to the Hilti drill.”

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