From product to service

Ever since humans began to systematically examine economic questions, the scarcity and shortage of goods have been critical factors in trade. Scarce capital must be optimally employed, scarce labor sensibly distributed and scarce resources economically used. Since the middle of the 20th century, though, the key to success in more and more markets of the global economy has been something else. The successful companies today are those that are capable of asserting themselves in a world of oversupply and abundance. As a result, services are becoming increasingly vital.

The evolution and its causes

The fundamental reasons that have fueled this sweeping evolution are rich nations’ transformation from industrial to post-industrial societies, new demographics related to this change as well as new material and service technologies:

Population levels are stagnating. In those places where they are not, growth is based on immigration and, as a result, the rise of multicultural and, thus, more heterogeneous societies.
The average age of people is climbing. Households are becoming smaller and more mobile.
More and more money is being spent on non-material needs like communications, entertainment and health care. At the same time, less money is being spent on needs like food and beverages, clothing, important household items and the construction of apartments.
New materials and technologies open the way for efficient production around the world.

In the wake of these developments, companies are having more difficulty generating revenue with standardized, mass-produced products. Needs are becoming more individual, diverse, malleable and fleeting. Market niches that can be successfully supplied over a long period of time are shrinking and more frequently require a combination with services. This applies not only to consumer goods but also to industrial sectors of the economy.

The path to the tailored solution

Today, many companies are trying to meet the new demands by employing “individualization” or “mass individualization” (“mass customization" Mass customization ) of their assortments and products. In a reflection of this trend, material products are upgraded through the use of value-added services and improved quality. It is not only products but also "problem solutions" ("solutions") that are in demand. As examples from a variety of business sectors show, the successful companies are those that are able to offer their customers tailor-made, service-focused solutions without being smothered by an overwhelming assortment, inventories and production costs.
Concepts from modern logistics are being expected to provide answers to the new challenges arising from mass individualization, decreasing loyalty to companies and brands, reduced predictability and the growing service demands of customers.

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