rcKP - services at the edge
by Philip Boxer
How are we to think about the services offered by a business taking power to the edge? One way is in terms of the three asymmetries.
As pointed out here, the economies associated with the first two asymmetries can be secured under conditions of North-South dominance. This means that their profit potential is defensible because the knowledge associated with creating them is asymmetric on the side of the business: the business has something that both its competitors and customers do not.
In contrast, the third asymmetry requires East-West dominance capable of delivering an appropriate degree of intensity in the relation the business has to the customer’s value deficit, defined in terms of the customer’s effects ladder. This intensity reflects the degree to which the business is engaging with the asymmetric nature of the customer’s demand. From this we can derive four kinds of service, the first of which assumes no relation to the customer’s value deficit:
- r-type: The presumption is that demand is symmetric, and therefore the service is to replicate the offering in as many variants and forms as can be profitably sustained, based on its economies of scale and/or scope. (e.g. pharmaceutical products, telecoms equipment)
The other three services all have varying degrees of involvement with the customer’s context-of-use:
- c-type: The business offers a capability that can be dynamically customised in relation to the customer’s particular use(s) of it. (e.g. providing injections, or telecoms connections).
- K-type: the business offers the know-how needed to collaborate with the customer in solving some part of a larger problem that the customer is experiencing. (e.g. managing an episode of care, or the connectivities available to a business).
- P-type: the business offers the ability to work with the customer on some area of pain that they are suffering, in order to find a way of making it tractable. (e.g. diagnosing what kind of treatment is needed, or defining what kinds of connectivities a business needs).
We can combine these into a diagram that shows the different types of service as a cycle which may or may not end up in the r-type zone:
In each cycle, there is an initial (P-type) service that develops with the customer a way of addressing its need (red circle). As the customer learns this way for itself, this may become a (K-type) service managing how those needs are being addressed (yellow diamond), if there is some aspect of the service that is also defensible. This may become a (c-type) service that the customer includes as part of how it manages its own needs (green triangle). Or the service may end up becoming commoditised and defined independently of the customer’s context-of-use, becoming an (r-type) service (blue square).
The precise dynamics of these cycles, and the mix of rcKP services offered by a business, will depend on the particular demand and competitive conditions encountered. What I have described, however, are the different kinds of service needed depending on the way in which a customer is choosing to internalise or externalise learning as it responds to some aspect of its own particular value deficit.
It follows that if a business is to be able to sustain power at its edge, then the services it offers will involve some mix of c-type, K-type and P-type services. The interesting thing about this mix is that its dynamic and collaborative nature makes the services necessarily relational, creating (at least) two-sided markets in the relationships a business has with its customers.