Article
Successful service is not born by accident
How to gain competitive advantage with design
Successful digital services today require a comprehensive design approach. In this article, I examine design primarily at the strategic and tactical levels and share my perspective on how design can create distinctiveness to achieve a competitive advantage.
Introduction
To begin, the formula for creating a successful service is quite simple: competitiveness + distinctiveness = competitive advantage. The one who has a competitive advantage is the winner. Distinctiveness from competitors is an important aspect of gaining a competitive edge, and it is often achieved through design. While design is not the only way to stand out, it is an area where it can be exceptionally well-utilized.
There are many products and services that, despite being technically high-quality, have not managed to stand out from their competitors and have thus failed to attract potential customers. A familiar example to most Finns is Nokia's rise and fall – how quickly Nokia lost its market leader position to newcomer Apple, which had a radically different vision of what a phone could be and how it should function. Apple's success was also aided by the development of an integrated device ecosystem where Apple devices communicated seamlessly with each other, unlike Nokia's corresponding ecosystem. But let's not dwell on Nokia; instead, let's look at modern digital services and how they have found a competitive advantage.
Into the Cloud
In today's digital landscape, subscription-based cloud services are revolutionizing consumer interactions with products and services. This model, known for its focus on continuous updates and superior user experience, offers a distinct competitive advantage by enhancing customer satisfaction. The following sections explore three types of subscription-based services – pioneers, typical services and new wave services – highlighting key examples and their unique market impact.
Pioneers
- Adobe Creative Cloud – Creativity as a service
- World of Warcraft – Game as a service
Before subscription-based cloud services, customers had to visit traditional brick-and-mortar stores to buy physical products, typically packaged in cardboard boxes or plastic, which contained the digital product (in CD or DVD format). Pioneers digitalized this traditional logistics path, which was a very logical direction for development. Customers now buy or download the product online, and the provider ensures that it is always up to date. Having the latest version of the product always available was a revolutionary change at the time.
Typical Services
- Netflix – Entertainment as a service
- Spotify – Music as a service
I dare say that Netflix and Spotify have made the subscription-based business model a part of our daily lives. Intangible services are typical of SaaS offerings. In both cases, you pay for the experience, not for ownership. Additionally, these services are continually evolving with new and changing content. Mobility is also an essential aspect of both services: customers always have "all" the world's entertainment or music in their pocket.
New Wave Services
- HiLTi – Tools as a service
- Espresso House – Coffee as a service
New subscription-based services are built around a physical product and enhance it with a service experience. For example, HiLTi takes care of the maintenance and storage of tools. Customers save on infrastructure costs, as there is no need to acquire expensive storage spaces or dedicated maintenance personnel for the tools. Similarly, Espresso House offers additional services and benefits to subscribers, such as coffee without waiting in line. An emerging subscription-based service type is Intelligence as a service, referring to the rapidly growing AI industry and its offerings, such as Google's Gemini and OpenAI's ChatGPT.
A common feature of these examples, and subscription-based services in general, is that they focus on usage and experience rather than ownership. Another shared characteristic is the ease of use from the customer's perspective; the service is easy to adopt and simple to use. For the service provider, the subscription-based business model creates a continuous revenue stream, aiding in business predictability and strategic planning. Since subscription-based services are almost always cloud-based, they are also scalable solutions, as it is relatively easy to add new platform or device support later. Furthermore, the subscription-based model can lead to cost savings once it is up and running.
Strategic Design
Now, many might wonder: This is all very interesting, but how does it relate to design? The short answer is: In every way! It may not often be considered, but the business model is one of the most important factors influencing and driving design. The business model determines, on a high level, how the entire ecosystem is structured and, on a lower level, how elements such as the application's user interface function.
Apple's former CEO, Steve Jobs, aptly described design by stating:
“Design is not just what it looks and feels like. Design is how it works.”
This quote applies to an entire service ecosystem, which also needs to be designed – it doesn't create itself. Strategic design refers to the application of design methods to understand the big picture. Alternatively, traditional business methods are examined from a design perspective, often referred to as business design or holistic design. Design can be used to describe an entire service ecosystem, how well it functions as a whole, how effectively its components communicate with each other, and how well they operate independently. Additionally, design provides a means to map all stakeholders and their dependencies within different parts of the ecosystem.
Let's use Netflix and its device ecosystem as an example. Netflix supports all the most common platforms and devices, whether it's a phone, tablet, computer, laptop, gaming console or smart TV.
Although each platform and device has its own interface conventions – its way of doing things – every application functions in nearly the same way and is clearly recognizable as a Netflix application. Additionally, the experience is seamless across different platforms and devices, allowing users to watch a show on their phone during the commute and continue from where they left off on a smart TV at home. All of this requires thoughtful design, meaning that an excellent user experience and a successful service are not born by accident.
Modern digital services such as Netflix and Spotify create continuous experiences and allow users to freely choose the best way for them to interact with the service and its content.
Tactical Design
Tactical and – especially operational design – is more strongly associated with the aesthetics that everyone loves, which, unfortunately, is the common perception of what design is. In digital design, the aesthetic aspect is most often visible to the end user in the form of the visual user interface.
Jef Raskin made a very fitting comment on the topic:
“As far as the customer is concerned, the UI is the product.”
Since modern subscription-based services are almost always cloud-based, they typically offer broad device support and a consistent user experience across all devices. These services are often very self-service oriented, meaning they are easy to set up and operate. To achieve this, the user experience is designed to be as simple and straightforward as possible. This is where user experience design comes into play.
While the user interface is an important part of the user experience, designing it alone is not enough. The entire experience must be designed by, for example, defining typical use cases and mapping user journeys within the service. User journeys focus on seamless transitions and aim to remove all barriers to ordering or using the service. Both external and internal factors are often identified to determine where improvements can be made in the user journey. User interface design and user experience design are strongly interconnected.
Examples of the external and internal factors that come into play when designing the holistic experience for modern digital services.
Design Management
Since strategic design forms the foundation for tactical design, which in turn supports operational design, I would like to say a few words about design management.
Imagine reaching the fortunate situation where a subscription-based service has been successfully scaled across multiple platforms and devices. In such broad contexts, managing digital design can often become a challenge. This is where a design system comes into play. A design system primarily manages digital design, including the building blocks used to create all interfaces and services. A design system is not just an approach or a tool; when implemented correctly, it also guides the entire production process by defining how complex digital services are designed, developed, and updated. Thus, a design system can also be seen as a process and a way of working.
A design system serves as both a brand management and product management tool. If the design system is public, it also acts as one of the company's marketing channels.
Another essential aspect of design management is measuring the success of design. Especially in aesthetic design, measurement has often been highly opinion-based, characterized by so-called guru and HiPPO cultures. In the past, design was often commissioned from so-called gurus who had achieved a status where everything they touched seemed to turn to gold, such as the famous Finnish architect and designer Alvar Aalto. Alternatively, design decisions have been made by individuals without design education or experience but who hold decision-making power due to their position. Previously, success was measured retrospectively by a product's financial success and industry recognition. Of course, customer-centricity has sometimes been sought, particularly in the United States, where focus groups and marketing surveys have long been utilized. However, Steve Jobs often lamented that participants in Apple's focus group sessions did not come up with very good ideas.
Steve Jobs once stated:
“It's not the customer's job to know what they want.”
The aforementioned guru and HiPPO cultures are also closely related to the measurement of design. Trust in gurus' design is based on the belief that the guru has done their best and is the best judge of their own work. Conversely, HiPPO reflects design decisions through business decisions and attempts to evaluate the success of the design by considering whether the result meets the specifications, pleases the target audience, and most importantly, whether it sells. These methods of evaluating design are very subjective. Fortunately, there are many objective ways to measure digital design, such as:
Qualitative Metrics
- Customer surveys and interviews
- User testing
- Customer feedback
- Market place reviews
- Mentions in media
- Industry recognition (awards)
Quantitative Metrics
- Analytics and data
- Conversion rate
- A/B-testing
- NPS-surveys
- Market place ratings
Traffic is often considered a vanity metric in analytics, but the fact remains: without traffic, there are no sales. This makes driving traffic an essential metric to track. In addition, there are also business metrics for measuring design impact, which I discuss in my other article, Design meets Strategy.
Benefits of Design
Nowadays, almost every industry faces intense competition and even oversupply. Therefore, a successful service must stand out from its competitors, and it is through design that distinctiveness, desirability, customer experience, and most importantly, intangible value are created. By intangible value, I mean the company's brand, which doesn't physically exist but represents how the company hopes to be perceived. A good examples are Continental and Pirelli: many people probably know, at least to some extent, what these companies do, even if they don't own a car, and this is solely due to the companies' brands. A well-managed brand influences the customer experience and pricing – often allowing for a price premium – thus driving the business.
Design can be used to map the playing field, identify target groups and their needs, and thus help focus on the right things. In other words, design helps develop high-quality services that people want to use and experience.
Conclusion
Today's successful digital services are extensive and complex entities, and they are expected to become even more complex in the future. In summary, design helps package these complex entities into products or services that are suitably simple and cohesive for delivery to customers. ▪