For stock market watchers and investors, that’s good news. But it’s also a clarion call for service designers to be skilled and capable of creating services that users’ value, result in promised service outcomes, and achieve positive user experiences. These are the hallmarks of service innovation.
Industrialized Nation’s GDP Relies on Service Sector
The economies of most industrialized nations are driven by private services: food and dining, arts and entertainment, hospitality and tourism, education, professional and scientific offerings, retail, real estate, and more. The U.S. economy, the largest, is comprised of near 80 percent services. Countries in Europe and Asia are not far behind.
So, when I see stock market deviations, I consider them temporary, periodic blips, and believe our recovery will be far faster than past market downturns. In the past, our economies were more heavily dependent on industry output, producing goods. But nowadays, we are far more reliant on the service sector, which has the lion’s share contribution to our standard of living. Economists use Gross Domestic Product (GDP) to determine economic health and is the measure for the average standard of living. GDP is made up of market output and sector jobs, or labor opportunities.
Throughout the 1800s, agriculture output dominated the world’s economies. Then, by the 1840s—shortly after the U.S. Government began tracking GDP—service sector economic output began to grow, coupled with the industrial sector’s growth. Thirty years later, the service sector outpaced the Agriculture sector in the U.S. economy.
Forward to the decades between the 1850s and 1910s, and output from the service and industrial sectors continued to grow in tandem. But after that time, the service sector began to out-distance the industrial sector, and since then, the service sector has jumped from 40% of the U.S. economy to near 80%. The industrial sector, meantime, peaked around the 1910s steadily declined in the 1950s, to now just 30% of the U.S. economy.
“We have now become a service economy that doesn’t produce stuff,” Saint John’s University economics professor Louis D. Johnston, said. Historic Economic Growth.
We Depend on Services
In our current pandemic environment, certainly we can suspend services, but we can’t do without them—and we can’t wholesale replace them either, since they frame our lifestyles. Yet to maintain those lifestyles, we need to continue growing our service sector base, a tidy role for service designers.
Rest assured, sufficient numbers of service designers are at work on innovative services, referring to those that are unique in some aspects, such as how they are accessed, used, able to fulfill a purpose, and a resulting service experience.
But the looming question is whether the work of service designers will prove sufficiently innovative to contribute to economic growth, whether their designs can achieve market disruption to give the economy a jolt. Most of us consider iTunes, Amazon, Uber, WeWork, Netflix, GEICO, Wikipedia, Skype, and Google all market disrupters; and readers can probably fill in others.
Disruptive innovation is a term coined by American scholar Clayton M. Christensen in 1995, and refers to displacing established market-leaders with new offerings. A disruptive service establishes a new market and creates new business opportunities along with new jobs and job functions. Innovative disruption also results from a new business model. All successfully disruptive innovative services attract sufficient numbers of users and result in sustainable demand.
Designing for Disruptive Innovation
There are service design techniques that will help drive toward innovation, such as Journey Maps. There are also prototyping strategies that are helpful for innovative idea generation. One is ‘Iterative-Refinement’ a method for testing, advancing, and transforming a design using repeated, frequent testing of a single concept. Another is called parallel method, whereby design teams brainstorm ideas separately, later coming together with respective designs to compete. This method generates a variety of ideas, and any one of them idea on their own can be incorporated into a winning design.
In sum, services will continue dominating the world’s economies and driving our standard of living. Yet service innovation is important and market disruption, even more so, particularly given this time of fear and uncertainty. Service designers are at the forefront of the challenge, and need to be well prepared with service design tools, models, methods and techniques.
Steven J. Slater, a master service designer and author of Service Designer handbooks, is co-founder of International Service Design Institute.
For Service Design professional development resources, visit www.internationalservicedesigninstitute.com.
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