In February, Tekes, the Finnish Funding Agency for Technology and Innovation, invited Finnish business leaders to talk about the sources of Finland's success. A lively and valuable discussion ensued about intangibles and services. I argue that the source of Finnish economic growth lies in intangibles which play an increasing role in global value creation.
What are we really talking about when we talk of intangibles?
Buying a well know brand of bag or a luxury car makes a bigger hole in the purchaser's wallet than just the cost of production. The value of a bag, car or any other branded product is greater for its owner than just the material value, and because of that the customer is prepared to pay a higher price. This is the product's intangible value which might be derived from product development, design, marketing and sales. For the end user, the value is the feeling of uniqueness and differentiating themselves from others, the good feeling that a brand gives.
Feelings have a great importance in people's choices and decisions. An in-depth understanding of the customer's life, working life or business activity is a precondition for companies to develop successful products and services that will have meaning for customers and from which a profitable business can be developed.
Feelings are not just linked to buying handbags or cars, nor are they restricted to consumer products. The influence of feelings on choices can also be seen in business between companies, where the added value for the customer is increasingly from the experience of being looked after, a feeling of security, making daily life easier or the ease of a delivery process. The winners in the market are the holistic solutions which have been developed by listening to the customer and also understanding how he makes his buying decisions.
Do you know what your customer wants or do you just guess?
In order for companies to produce holistic solutions that will be valued by their customers, they have to dive through their understanding of the customer to generate value that means something to the customer. In today's world it is possible to collect data about customers easily. However, it is not enough to collect data; it must also be interpreted and utilised correctly. Companies need new approaches for this and also completely new kinds of unexpected partners who can help them get into the customer's skin and inside his head.
The only approaches that will be successful are those that are of value to the customer. Sometimes the customer is a mystery to himself, so a genuine understanding requires in-depth analysis of the customer's life overall, and developing a view as to what this means for the development of your own business.
The role of Tekes is to help Finnish companies grow. We believe strongly that a critical factor for growth is how companies are able to exploit their intangible skills to create meaning for customers. We want more of that for Finland.
The author is Director of Tekes' Service Innovation unit