An entrepreneurial frame: turning a service into a product.

Nevada, 2007

Every day I get to look at and think about markets, products and disruptions that I may not have thought too much about. Instead of relying on simple pattern matching, I use “frames” as a way to help me understand the important, big, underlying trends that matter instead of focusing on the more obvious surface changes. It’s how I pay attention to strategy instead of tactics.

One frame I’ved used lately for understanding a business:

Turning a service into a product

We all know the difference between product businesses and service business. Staffing, scaling, operating, etc., all the core functions behind how they work are entirely different. Suster explains the difference between product and service businesses pretty well here, with some tangible and tactical advice about how service businesses should approach their dreams of building products, and how they should approach their financing options.

Service businesses often try to build product businesses based on their experience in services; as Suster lays out, there are some key things to pay attention to if you try to go that route.

Another route is take something that is traditionally a high-touch service and turn it into a standardized lower-touch product.

An example that’s been in my mind lately, thanks to Sloane: Drybar, a company that isn’t a full-service hair salon, but instead focuses on just one niche: blowouts.

Of course, I’ve never gotten a blowout, so I have no first-hand knowledge here: everything about this I’ve learned from her or reporters. But here’s the basics: they have turned what is traditionally a consultation and a conversation between the stylist and the customer into a product by creating a simple menu of types of blowouts with set prices (i.e. prices aren’t dependent on the women’s hair, and are set and known from the beginning, different from usual salon blowouts). They have standardized the process to make it easier for women to come in an use any stylist, rather than having to wait for their usual, trusted stylist. The stylists get customers in and out on time and to maximize turnover, a key profit metric and challenge for salons with their more complicated and customized range of services (at Drybar, stylists are instructed not to turn off their blowers, attempting to keep the production line flowing smoothly, a process that simply wouldn’t work at a traditional salon).

Like most businesses without a core product differentiation, prices are roughly similar between Drybar and other competitors, so they compete by offering a great product in a fun atmosphere, getting women in and out on time, and adding in extras like a free drink or coffee and charging stations for customers’ phones. By focusing only on blowouts, they aren’t forcing women to switch from their usual stylists, only to add-in a blowout as an “affordable luxury”, helping make customer acquisition less expensive.

And at a time where hair salon industry is flat at best (revenue across the industry down 0.3% each of the past 5 years), they have helped to create a category that has the potential to steal a share of spend without stealing women away from their stylists.

They’ve turned a service into a product.

Very interesting, IMHO.

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* Have an idea for another entrepreneurial frame to cover? Leave them in the comments.