Reed's Law and the Support Economy

If you have not read Reed's law yet here is the link

What he is saying is that the big value to come will not be in selling a thing, not in having a broadcast network or even a association network but will come from facilitating the development of communities.

eBay is the model of such a new type of business that facilitates the needs of the customer. Those companies such as Dell that made their name by building a community with their customer but then gave up the service in the search for margin have I think missed the point. They have now chosen a commodity death spiral. The link takes you to Johnnie Moore who has had a problem with his dell and who links us to Dave Pollard who suffers the same indignity in trying to get help from Dell.

So Dell have I think blown it. They have walked away from the potential in Reed;s law and have regressed to the commodity path to hell.

What they missed was that the service and the community of users was the business and that the product was only the instrument. It is clear now that most products price to zero over time. How much does a DVD player cost now $50? What does this do the price of a DVD? If you are a DVD player manufacturer you are now in hell and cannot get out. This is what is happening to all those that make and sell a thing.

Do we need the things or do we need their service? This is a big idea that is explored by Paul Hawken and the Lovins in Natural Capitalism. Do we need an air-conditioner in hot wweather or do we need "Coolth" - the service of an air-conditioner. If carrier sell Coolth, then they get out of the trap of selling a thing and sell a service. They then develop a long term community of "Coolth" customers and start to meet Reed's law.

I think that the future of computing will be in service. I need someone to manage my home network. I need someone to uncrash my crash and to keep me free of spy-ware and viruses - not Symantec with a product to sell but someone who cares for me. If I really have a bad attack, the software is only the beginning. I need real help on the ground at my machine.

If you think a bit - this applies to most major purchases where I don't really want a car, I want carefree transportation. I want to buy the ongoing service of a car. For instance, 3 weeks ago my lawn tractor died - a broken transmission. It took 2 weeks for the dealer to fix it. 2 weeks in the middle of the grass season! I don't want a tractor i want my lawn cut easily. If Deere offered me the "service" of a lawn tractor, I would buy years and years of the service. They would have a real relationship with me and could facilitate the growth of a community of users. Why then would I go to another supplier, especially if the dealer was up the road form me as he is.

Is this such a difficult idea to grasp? Isn't this the essence of the Support Economy?

Comments

[Joshua]

It's very interesting to see these sorts of ideas start to make there way into traditional practise. It's seems to me that, as a customer, purchasing 'coolth' will be based more and more on the name. In traditional business, we used physical assets to leverage our business and increase profits many times. However, with coolth services are provided and long-term relationships are established. No longer will I take a chance on establishing a relationship with a company who I know are hit and miss. But right now, I may buy a cheap product that could be of inferior quality because it's not an on going relationship with that company. Brand or strong community (relationships) may be the new way to leverage these new abstract assets. As I continue to work on starting a business, these are some strong ideas that I want to keep in the forefront of my mind. Great article Rob!

[Johnnie Moore]

In fairness, my recent computer headaches weren't with Dell, though I think the attitude is almost endemic in the industry.

The word that leaps out at me from this post is "care". The feeling I got from tech support was that they simple weren't able to offer real care for my situation. When we choose a service over a product, it's to ensure continuity of care.

Care doesn't lend itself so easily to many businesses that demand rigid systems designed to improve averages but not attend to the individual.

The other C word that interests me is community. When you facilitate a community you empower community members to do some of the caring themselves. That seems to me be a real win:win.

[Stuart Henshall]

Rob,
I see you have The Age of Access listed. This is what I said some years ago. http://www.firstmonday.org/issues/issue5_5/henshall/index.html. It's why I've moved from a focus on records information assets and identity to P2P based communication systems particulary around presence. See also my post re the FCC today.

I don't thing we want to be "locked - in" to services. I do think we want great experiences.

Cheers
Stuart

[Robert Paterson]

Hi Stuart

I regret that the link did not work. But I agree that the experience is the attraction. I thought that the book had a good point and I use the central idea in much of my work.

For instance in the restaurant business, if you focus only on the mechanics of getting the meal onto the table, you miss the entire poit that we go out to have an experience.

My posting point was that it is probably best for all also to see that we often confuse the thing with its core service.

If auto makers sold the service of the "experience" of trouble free transportation plus the experience of the status that you wanted sent - depending on what you could afford - then we would have a much more sustainable auto industry.

If Ford now owned the car all the way, it would build the car to be easily maintained and renewed. Their service focus would be to ensure that you were on the road and trouble free all the time. The costs for society, for Ford and you would be lowered because the disposal costs would be designed out. Their interests would increasingly coincide with yours - in that meeting your ongoing needs for the right transport experience would be their specific goal not just to move iron.

My experience with the lawn tractor was not a good one and I think illustrates the failure to see that they were really selling an experience.

I paid a lot for it and expected to be have a trouble free experience. I also expected in the unlikely event of it failling, to be fixed promptly and that i would be kept whole - say with a replacement. Having paid top dollar I expected a great experience.

The dealer failed to fix it quickly because it did not have the parts, inexcusable as the main dealer for a high end machine, and gave me the impression that it was all just too bad. So I did not count. The experience was so bad that i will never buy either the make or from this dealer again. (Not Deere)

[Dave Pollard]

Hmm...now this is *really* interesting. If the value is as shown in Reed's curve, then the price, in a 'free' supply/damand elastic market, should be commensurate. Your tractor example is excellent, in a world where even car dealers don't provide loaners anymore. We should think through how this applies to *every* industry, as an additional element of the innovation process. This also ties into the recent phenomenon of selling extended warrantees (essentially 'service insurance') as an expensive 'extra' -- perhaps a tacit admission that this is where the value is? Lots for thought here -- thanks.