Sell Holes, Not Drills

April 17, 2017

children's fire truckThere’s an article in today’s San Francisco Chronicle that made me remember a cute story about sharing – or not:

Tommy and Johnny were four-year-old twins. One day they were playing on the floor when Tommy asked Johnny, ‘Do you want the big red fire truck right now?’ To which Johnny replied, ‘Not unless you do.’

The underlying idea, of course, is that we don’t come into the world wanting to share.

Indeed, most of our economic, social, and even military history is based on a world of scarcity. In a capitalist or free market society, the economic value of goods and services is determined by the balance of supply and demand; when something desirable is scarce, we are willing to pay more for it. And when something is plentiful, or in abundance, its price typically drops.

Of course, none of us lives in a pure free-market world, though most of us pay homage to that concept all the time. It also turns out that we are using up many things we’ve always thought were just there to be shared to our hearts’ content – like clean air and water.

But this is not about to become a political rant.

Rather, that article in The Chronicle this morning got me thinking about the changing nature of our preferences for sharing goods and services rather than owning them outright.

The article by Carolyn Said, “AAA to offer one-way hourly car rentals in East Bay,” describes a new short-term one-way car-sharing service being launched by the American Automobile Association of Northern California in Berkeley and Oakland.

I know car-sharing services are not new – operations like Zipcar and City Car Share have been around for a long time. And of course the major car rental companies – Hertz, Avis, Enterprise, Thrifty – are decades old. However, most of those services require renters to return the car to the location where they picked it up, or to pay a hefty drop-off charge.

And don’t forget that the biggest disruption in the automobile sector comes from companies like Uber and Lyft, which not only offer customers short-term one-way access to an automobile, but they also include a driver.

I was particularly intrigued by a comment in the Chronicle article about the decline in full-time car ownership, especially among urban residents. In the words of Mike Hetke, chief innovation officer for the regional AAA branch:

We are doing what we’ve always done: enabling mobility,” Hetke said. “But we see member needs changing over time. There’s a fundamental shift from individual vehicle ownership to transportation as a service.” [from the article]

The article also mentioned that the city of Seattle recently surveyed the users of car-sharing services and discovered that about 14 percent of them had given up owning cars altogether. Again, that is not a new phenomenon, especially among urban residents. But it looks as if the Millennial generation is moving much more in the direction of minimizing the “things” they own and maximizing their reliance on service businesses and on the “sharing economy.”

For me, that is the underlying factor in all these car-rental and car-sharing businesses: the evolution of that industry, and many others, from producing and selling products to providing services.

At a macro level, it all makes sense to me. Sharing “things” results in a far more efficient use of natural, often-scarce physical resources. Why pay to own a car that spends about 90 percent of its time sitting in a garage or a parking lot?

Obviously, that’s the same rationale behind AirBnB and many other resource-sharing businesses that have grown so rapidly in recent years (in the workplace world, the obvious parallel is with co-working and firms like WeWork and LiquidSpace). The city of Berkeley, where I lived for 17 years, even has a Tools section in its public Library. If you can borrow books, why not share tools that you only need once in a while?

The question you should be asking is, when – not if – will resource sharing disrupt your industry? And, what resources do you own today that you could just easily rent, lease, or share with others to save costs and enhance your capabilities?

There is even a better way to think about that question: “What outcomes do we want, and what is the best way to achieve them?”

Here’s a final story, perhaps apocryphal, but no less compelling:

Many years ago, the CEO of a major drill bit manufacturer told his team that he had just realized their customers didn’t want drills.

Since the company was highly successful, his staff refused to believe him and challenged his assertion. To which he replied, “They don’t want drills, they want holes.”

That shift in perspective led the company to explore all kinds of innovative ways to produce holes other than drill bits, including technologies like laser beams, high-intensity heat, and even cryogenics. And they also built a drilling services division. Needless to say, a company that produces holes is a very different business than one that merely manufactures steel drill bits

What outcomes do your customers want?

 


Don’t face the future alone. Jim Ware creates experiences that enable organizational leaders to make sense out of the future and and build solutions the delight their customers.

Contact Jim today, or call him right now at +1 510.558.1434 to learn how his workshops, keynote presentations, and expertise in orchestrating powerful conversations can put the future to work for you.

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{ 2 comments… read them below or add one }

David McCarty April 18, 2017 at 9:08 am

Jim,

Great little thought starter! You just got me thinking why am I wasting so many resources creating BIM models (essentially doing drafting work). My highly educated and experienced professionals should be focusing on better designs, not better drawings!

Reply

James Ware April 18, 2017 at 9:16 am

Thanks Dave! I’m glad the ideas are helpful! Funny how I started the post focused on the sharing economy and ended up highlighting managing for outcomes – but that is what ultimately matters.

Reply

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