Did service design help the iPod succeed?

The iPod was a runaway success and turned Apple’s fortunes around to put it onto the path to becoming the most successful company on Earth. But have you ever wondered how that happened?

As service designers we spend much of our time thinking and learning about existing services that our customers have and that we see around us.

Our clients often deliver services to their customers and understand at least some of the dynamics in those relationships. We bring the customer perspective into play and add value by understanding all sides and designing better journeys.

For me, one of most interesting ways that one can create is by looking at products and re-imagining them as services, and seeing if that can demonstrate clear differentiation — especially in competitive markets and show real value to consumers where it serves a service need.

The iPod’s backstory

One of the best ways of explaining this is by returning to the story of the iPod. There were many competitors to the iPod when it launched — some with better technology and many that were cheaper — but all eventually fell in the battle with Apple.

Whilst it launched in 2001 it didn’t really take off until 2004.

Many theories have been put forward as to why this success eventually happened:

It was a great piece of product design

The user interface was simple and intuitive

It had a captive user base of fanatics that catapulted the launch

Great advertising and branding

They added Windows support

Whilst all of these have elements of truth and did make a difference, with my service design hat on, it’s clear that the the real killer was the iTunes Store. It was this that started selling digital downloads of tracks and albums when it launched in October 2003 with the result that, in that quarter and the next, more iPods were sold than in the previous 2 years.

What elevated the iPod from an also ran MP3 player was the recognition that the problem they were solving wasn’t “a better portable music player” which is a product question. It was “how can I easily buy music to put on to a portable music player” which is a service question.

Once that was the question, then it was a matter of persuading the owners of music to licence through iTunes, using the product levers of great product design, great UI, large and engaged customer base. All this, plus the reality distortion field. It also used “lock in” via Fairplay DRM and AAC format (now Apple stalwarts) which appeased the media owners and made it hard for customers to leave.

This combination of an easy to use service that people were willingly locked into gave Apple a virtual monopoly with a moat around it that was impossible for its competitors to breach. As Peter Thiel — co-founder of PayPal says in his book Zero to One “If you want to create and capture lasting value, look to build a monopoly”. This is exactly what Apple did so well.

The end result, a service called iTunes Store that drove sale of iPods and changed a generation.

What can we learn from this?

If you are trying to sell a product in a competitive and feature driven market e.g. portable music players, it isn’t enough to have the best product with the best features. To be a compelling purchase you have to have a value proposition that goes beyond your competitors. The best way to do this is by creating a service around your product that solves real customer needs.

In Apple’s case, because they were solving the recording industry’s problem of dealing with piracy as well, they were able to lock in both sides of the equation.

Therefore, once you have a service advantage, use whatever tools you have at your disposal to encourage your customers to stay loyal. A great example is making your service responsive to your customers’ needs, before your competitors can catch up.

And this applies even more so if your product is intangible such as insurance, where there is no physical product to delight and experience. It is only the service value that you can build around your offering that can elevate it out of price competition.

The challenge is to find out and understand what the real needs of your potential customers are.

We identify needs using a service design approach that uses design thinking and co-creation with real people. This gets us to framing the right service questions, which address real customer problems.

It is important to use research, observation and empathy to uncover these needs as they are rarely what people say they are. As Henry Ford said, “if I had asked people what they wanted, they would have said faster horses”.

Similarly asking customers what they want rarely uncovers un-met needs, this customer focus creates deep insight into their problems which then allows us to design meaningful service offerings to satisfy real customer needs.

In summary, using service design to differentiate products is clearly effective, but it needs to be aligned to solving real customer problems.

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