Innovating on the Intangible: How Services Are Mapping a New Frontier in Tech

It’s appealing to think that innovation is driven by special people with an uncanny ability to see the future. But the reality is simpler—and more attainable. The job of the innovator is not to impose an arbitrary new paradigm on the world. Rather, it’s to recognize a necessary shift that’s already in progress and accelerate it. In the technology industry today, that means recognizing that services are supplanting hardware as the new frontier in innovation—and embracing the challenges and exciting possibilities that come with this new era.

The end of ownership brings opportunities and challenges

The rise of the subscription economy in both the B2B and B2C spaces is the clearest sign of a new tech paradigm centered on services. The global subscription economy is seeing sustained growth : It approached $650 billion in 2020, and it’s expected to hit $1.5 trillion by 2025. End users, as we’ve also witnessed at HP, are moving away from the permanent physical ownership of technology in favor of investing in recurring value-added services. This trend is only going to continue.

After all, digital technology has always been an imperfect fit for the physical ownership paradigm. At the dawn of the personal computer, even something as plainly intangible as software was disseminated physically. It came in a box from the store like any other product. As we look to the future, we have choices that didn’t exist before. We can be much more strategic about what makes sense as a physical product offering and what delivers better outcomes as a digital-only service.

The rapidly emerging services model has obvious advantages. It gives hardware companies a chance to build steady income streams and create more regular touchpoints with customers. It gives consumers flexibility. It’s a sustainability advantage, too, as it ultimately returns the hardware to the company, where parts can be recycled or even repurposed. To thrive in this new paradigm, technology companies must respond by embracing these fundamental changes to customer relationships and the nature of innovation itself.

Reimagining a closer, more engaged customer relationship

At HP, we have recognized two interconnected trends that are fundamentally changing customer relationships. They are “Prosumers” and “Segment of One.”

Prosumers are an emerging and very influential category of consumers in every market whose needs and buying behaviors regarding both personal and professional technology have largely merged. They are the embodiment of the hybrid lifestyle many of us live today, where work, school, doctors’ appointments, entertainment and more might all occur using the same device. Even before the pandemic, the prevalence of remote work models and gig work was beginning to make personal space and personal time hard to distinguish from workspace and work time—a trend that has only accelerated in the last 18 months.

The challenge for technology companies is providing tailored services that meet this single customer’s diverse needs. We’re going to have to think creatively about how we do that. For instance, imagine a computer subscription service that charges one price for social apps and gaming, and another for the productivity suites used for work.

Dovetailing with the rise of prosumers is the Segment of One—a model in which technology companies can offer hyper-specific value propositions to each individual consumer. With machine learning, we can even hyper-customize offerings based on actual user history and deep data with the customer’s knowledge and consent. The subscription model gives us agility to respond quickly to—and even anticipate—the changing needs of that one-customer segment moment to moment.

Hyper-targeted innovation

Formerly, innovation was about developing new features and improving hardware specs—faster processing, more storage, larger screens and higher resolution. But in the era of technology as-a-service, innovation is moving beyond features and specs themselves to systems for customizing and adapting them to the unique and shifting needs of the end user.

This kind of innovation is not simply more possible than ever; it’s more necessary. The end of ownership gives users more agility. They can try your service with little up-front investment and opt out when it’s convenient. For Millennials and Gen Z, the fastest-growing segment of consumers, subscriptions appeal to their desire for experiences—being able to interact with Netflix rather than own a collection of movies, for example. And when a subscription model offers convenience and sustainability, they are not only eager to forgo traditional ownership, but they will also pay more . For brands, building loyalty means frequent interaction, responsive service, consistency and reliability.

Consider HP’s Instant Ink monthly subscription. Customers pay according to the number of pages they print in a month. When ink cartridges are low, the printer automatically notifies us, and replacement cartridges are in the mail before customers know they need them. Our service eliminates the hassle of shopping for ink, virtually ensures the printer never runs out and brings predictability to a variable expense. And the relationship can continue when the customer inevitably upgrades to a new printer model.

At the heart of this service is a novel, but fairly simple, use of data to add value for the customer. Services open the door for countless innovations of this kind, and many of them will be far more technically sophisticated. The best service models will leverage new trends in user behavior, as well as the potential of data to support new ways to deliver efficient, personalized and responsive services to each unique customer—and lead the way into the new era of intangible innovation.