And the third chart shows the tremendous shift in the US over the last 65 years from the consumption of stuff to services.

This last one is fascinating. And it ties into the argument that the way value is created in our economy has shifted dramatically.

But I wonder if this change is really as sharp as it seems. 

If you look at what makes up “services”, you’ll see that housing (and utilities) and healthcare make up over 50% of what is considered to be personal spending on services. And if you look at housing and utilities spending since the 1960s in the US, it has increased dramatically. 

So how much of this shift from stuff-to-services is actually being driven by housing?

So products are a bit of a holy grail in some circles. You can achieve greater scale. You can focus on fewer projects as opposed to jumping around from client to client. And you can make a lot of money.

But it’s often easier said than done. Back in 2012, Teehan+Lax wrote a great post where they talked about the allure of products and the challenges they faced in trying to build their own:

37Signals* was the worst thing to happen to services businesses trying to make products. They fucked it up for all of us, because they made it. For those of us old enough to remember, 37Signals was a services company like Teehan+Lax. They had clients and did work for hire. Of course, 37signals isn’t a services company anymore. They make amazing digital products and their success is enviable. (*37Signals became Basecamp)

So why is it so hard to transition from services to products?

Clayton Christensen, the father of disruptive innovation, says, “you can’t start a disruptive business from inside an incumbent one.” The incumbent business will always take the resources from the disruptive one. He argues that if you want to create a disruptive business you need to isolate it from the incumbent business. The disruptive business needs its own values, processes and resources to be successful.

Regardless of whether you’re trying to build something disruptive or not, amazing products are hard to build. They take focus.

But what’s also interesting about services and products is that there’s a parallel in the world of architecture and real estate development. As an architect, you’re basically a service provider. You have clients and they pay you for the work that you do. However, as a real estate developer, you offer a product: physical space. The cost structures are not nearly as beneficial as with software, but it’s a product nonetheless.

And similarly, we’re already starting to see some developers bring architecture in-house. Will we see more of this in the future? Will there be a similar pull from services, to products?

Image: Flickr

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