Provices and Serducts

Similarly, service companies are pushing to repackage their skills in profitably provocative ways; call them "serducts." Look at the megabillion-dollar global industry the investment banks have created in derivatives and synthetic securities like options and floaters. Their services skills in trading have been neatly -- and lucratively -- complemented by their willingness to invest in and invent new financial instruments. Remove these serducts from the global financial community and not only is the world a different place, but also the power and influence of the investment banks are radically diminished.

At the opposite end of the developing business-power spectrum are the once-potent advertising agencies. Why has their influence dwindled lately? One reason is that they have almost no serducts: agencies sign away the intellectual property they help create for clients. But remember the early days of advertising when the big agencies were rich, fat, and sassy? What was the difference? The agencies then often had equity in the shows they helped create for clients. The agencies were -- literally and figuratively -- radio and television producers.

This kind of hybridization represents the true destiny of innovation. Products will become provices and services will invariably evolve into serducts. Drawing the line between them will be a task for academics and accountants, not customers and clients. Why? Because this is what the marketplace wants.

Customers and clients -- especially smart customers and clients -- are looking for value. Provices and serducts represent a legitimate, important, and successful design sensibility for generating value-added innovation. Indeed, provices and serducts will ultimately become the building blocks of tomorrow's business models. Tomorrow's business plans will revolve around product-service hybrids -- not one or the other. Trick Question: Is Netscape (http://www.netscape.com) a product or a service company? How can you tell?

As technology makes it ever easier to craft new product-service hybrids, customers and clients will increasingly determine which blends make the most sense. Innovators will determine which blends will make the most money. Either way, organizations that focus more time and creativity on their products and their services -- rather than the interaction between them -- misunderstand the marketplaces they're trying to serve.

A reasearch associate at MIT, Michael Schrage (schrage@media.mit.edu) is the author of "No More Teams! Mastering the Dynamics of Creative Collaboration" (Currency/Doubleday, 1995.