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his article builds on the services agenda that Amy Ostrom et al published in Moving Forward and Making a
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Journal of Service Research, February 2010). The nine
priorities in the agenda are summarized in Figure 1. My focus is on fostering service infusion and growth, but the
message applies to all the priorities. Information and communications technology (ICT) is the pervasive force that is
changing the way we work, live, learn and play.
To understand how deeply technology is embedded in every element of life today, consider the following statistic, which appeared in M. Hilbert and P. Lpezs April 2011 Science article, The Worlds Technological Capacity to Store, Communicate, and
Compute Information. Since 1985, there has been a 1,000-fold increase in the worlds communications capacity. This analysis
ended with 2007 data, so it does not include all of the capacity gains in the last four years. Name another resource
that increased 1,000 times in 20 years.

The statistics make the point convincingly, but if you need

a more human illustration, consider this question: If you could
have only an indoor toilet and sanitation system or a mobile
phone, which would you choose? This trade-off may not mean
a lot to you, but billions of people in the world have faced this
choice, and their preference is clear: Communication is valued
more than modern sanitation. There are 5.3 billion mobile
phones in use right now compared to 4.3 billion toilets. Today,
almost four out of five people have a mobile phone. There is a
practical reason for this. It is not simply social chat that people
seek when they acquire a phone. Fast, reliable, immediate
communications directly change their personal economics.
Consider this story about an impoverished, isolated village. A
young child was feverish for days, and the family grew worried,
so the mother set off to take the child to the nearest clinic. It
took two days to get there on foot. It may have been only 10
kilometers away from home, but the mother was carrying the
child and the things they needed to live. When they got to the

clinic, they found that the doctor had traveled to another clinic
and would not return for 10 days. The mother walked back
home, which took another two daysan arduous four-day
trip, all for nothing.
A simple mobile phone call could have changed that story.
Better yet, if the village had Internet access, the doctor could
have made a remote diagnosis, instructed the mother on how
to care for the sick baby and prescribed medications. Wait,
how will the medications reach the village? You might have
heard that Coca-Colawhich has more than 100,000 delivery
vehicles operating every daycarries medicines to the most
remote ends of its distribution system, so that its supply chain
serves double duty in remote areas.
When we think of modern communications, we think of
the Internet. In 1995, the browser interface made the Internet accessible to more people. Before that, navigation was
complicated, so the Internetwhich began in 1970was used
mainly by academic and military researchers.

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B R I E F LY

t
Advances in communications technology will help product companies add

services to their mix to create new value.

t
Mobile phones, publishing and pharma are ripe for transformation.

t
In the future, users will access everything as a service from the cloudwith strategic
implications for todays product-dominated ICT companies.

The Internet carries all modes of communicationdata,

voice and videoover the same network, so it has the power
to consolidate old networks, reduce costs and increase
reliability. It is all just a stream of ones and zeros flowing
between people, people and machines, and just machines.
The Web was the fastest-spreading technology in the history of the world, having achieved 50 million users in just five
yearscompared to the 13 years it took television to acquire
this audience (Morgan Stanley Technology Research, 1999).
Facebook, however, now holds the record for the fastest diffusing technology: 100 million users in a single year.
Today, almost 30 percent of the entire global population
is on the Internet; in the United States, the number is 77
percent. Penetration is lower in Asia at 21 percent, but the
population is so large that this region contains the single
largest block of users42 percent of the Web population and
growing quickly (Internetworldstats.com, February 2011).
Some refer to this trend as wiring the world but, in fact,
many of the network connections are wireless, not wired.
Whatever you call this technology innovation, it has changed
the world in just 15 years, and even more rapid change looms
large on the technology horizon. This has caused market
disruptions and created new winners and new losers.

TECHNOLOGY DISRUPTIONS DRIVE MARKETS

As an example, consider book publishing, an industry that is
almost 500 years old. In the West, we attribute the invention
of movable type in 1450 and the resulting affordability of the
printed word to Gutenberg. This had wide-ranging effects
on religion because it enabled ordinary citizens to read the
word of God without an intermediary. It also influenced politics because ideas could be diffused quickly and accurately
across large areas, which accelerated the formation of nation
states.
Now there is an alternative to the printed book: e-books.
Electronic books outsold hardbound books in 2009 and paperback books (the most popular format) in February 2011.
In a short time, the physical book has practically been replaced by an electronic service. According to the Association
of American Publishers, for February 2011, e-books ranked
as the No. 1 format among all categories of trade publishing

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(Adult Hardcover, Adult Paperback, Adult Mass Market,

Childrens/Young Adult Hardcover, Childrens/Young Adult
Paperback).
E-book sales increased 203 percent between February
2010 and February 2011. Also in 2011, Marc Parrish, an
executive at Barnes & Noble, the largest U.S. bookstore operator, predicted that the shift from physical media to downloads will happen faster in the book category than in either
music or movies. By March 2013, e-books will be the norm,
just as DVDs replaced VCR tapes and music downloads
replaced CDs. A 560-year-old business model changed in less
than seven years, producing new winners and new losers.
Lets look at the value chains for these two publishing
modes. In the traditional publishing model, an author writes
a book, and a publisher edits and prepares the book for printing. The printer requires printing presses, ink and paper supplied by other industries to print and bind the book, which is
then put in a warehouse until a retailer places an order. The
book is transported to a retail store, where it sits on a shelf
awaiting a buyer, who purchases it and takes it home to read.
In the e-book value chain, a file stored on a server replaces
the complicated, expensive printing, transporting, warehousing and stocking of physical products. When a customer orders the book, it is downloaded to a reading device (e-reader),
a process that costs roughly six cents.

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GLOBAL PHARMA
Pharma is another global industry that is ripe for a service infusion. In the United States, health care consumes about 17.6
percent of the entire gross domestic product (GDP), which
was $2.5 trillion, or more than $8,000 per person, in 2009.
The U.S. Department of Health and Human Services expects
that the health share of GDP will reach 19.5 percent by 2017,
according to 2011 national health expenditure data from the
Centers for Medicare and Medicaid Services. Medicines account for about 10 percent of total healthcare spending.
But medicines do not do any good unless they are taken
as prescribed. Meanwhile, the majority of medicines are not
used correctly, and that creates greater economic and physical
burdens. Consider the antipsychotic drug risperidone (sold as
Risperdal). It is used to treat schizophrenia and bipolar conditions and to control the violent behavior of some people with
autism. When properly used, this drug can have a powerful,
positive effectbut it takes several weeks for the drug to reach
a steady state in the body and achieve the intended effects.
Unfortunately, the compliance rate for antipsychotics is
less than 60 percent, according to J.A. Cramer and R. Rosenhecks February 1998 Psychiatric Services article, Compliance
with Medication Regimens for Mental and Physical Disorders. The more doses that are missed the higher the chances
of costly rehospitalization, according to Chris M. Kozma
and Peter J. Weiden, whose article Partial Compliance with
Antipsychotics Increases Mental Health Hospitalizations in
Schizophrenic Patients summarized the evidence in the September 2011 issue of American Health and Drug Benefits. Noncompliance is costly for society because many unmedicated
patients require supervision or end up in the social welfare or
criminal justice systems. In addition, one cannot put a dollar
cost on the inner suffering that an untreated patient endures.
The pharma industry makes pills and is paid when they are
prescribed, even if they are not taken. What if this business
model changed, and the health care system was paid when
the patient actually took the pill? In other words, what if the
pharma product business model experienced a service infusion?
Technology makes this feasible. I am going to tell you the
story of Proteus Biomedical, a startup that were working with
in California. Proteus invented a small computer chip, which
it calls a raisin. It is the size of a grain of pepper and made of
all organic materials. The raisin is embedded in the prescription medication, and it contains a code that identifies the
drug and dosage. When the patient takes the pill, the raisin is
activated by the stomachs gastric acids and sends out a unique
signal.
That signal can be picked up on the patients skin as a
change in impedance, just like the galvanic skin response measures that are used in psychology research. A patch that the

patient wearsit could be a wristwatch or other devicedetects the signal and sends it over the network to a data center.
If the patient misses a dose by 60 minutes, a contact center
can call to find out what is going on. If the pill has not been
detected after, say, three hours, a technician can be dispatched
to track down the patient and make sure that the medication
is taken. If that sounds costly, just compare it to the costs of
noncompliance: constant supervision or institutionalization.
Figure 2 is a simplified schematic of the network architecture required to do this. You can see the flow of data between
the patient and the system of caregivers. This is a serviceinfusion case because it changes the business model from
product to service. Conceivably, in the future, the health care
system will be paid for effects. (It will be paid handsomely because of the savings that properly used medications produce.)
Those economic incentives will cause all of the elements of
the system, including patients, to collaborate toward the same
ends. Technology enables this industry conversion from making pills to creating effectsa service-infusion transformation
from goods to services.

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There is a worldwide trend toward what we call care at a

distance. Delivering health care anywhere, anytime at greatly
reduced costs will help us solve the accessibility and cost
problems that are vexing health care today. Here is another
example, which we are rolling out now in the United States,
Europe, China and India. It is called HealthPresence. A patient and doctorseparated by any distancecan interact via
life-size, high-definition displays. All of the patients vitals are
transmitted over the network in encrypted form. There are
high-resolution cameras to examine things like the tympanic
membrane in the ear or the retina in the eyes or the back of
the throat. Blood pressure, pulse and other data show up on
the doctors display. You will see these soon in drugstore clinics and on office campuses.

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INFORMATION AND COMMUNICATIONS TECHNOLOGY

Now we come to the ultimate example of service infusion:
information and communications technology. The traditional computing stack is being supplanted by everything as a
service.
For more than 50 years, the basic ICT business model was
the same. An enterprise bought components from various
suppliers and integrated these pieces to create ICT capabilitieswhich it then consumed. We talk about the components
in terms of the computing stack, which begins at the bottom
with infrastructurethe networks we makeand moves up
to storage, computer processors, middleware (what you might
know as the operating system) and then ultimately to the software application that delivers the desired results.
This is costly, time-consuming and requires an army of
expensive experts to implement and maintain. But it has been
worth the effort because information technology yields such
powerful productivity benefits.
However, if you look at the elements in the stack, you will
quickly discover that there is a lot of idle capacity. Systems
were built for peak surge demand, but that happens relatively
infrequently, meaning significant idle capacity. Amazon.com,
for instance, must have enough computing capacity to manage the holiday surge in retailing, but what does it do with that
capacity the rest of the year? Amazon sells it to others, because
network technology allows users who are dispersed across large
areas to share pooled resources, which are assembled in virtual
machines.
Virtualization means that the components within a given
boxsay, a storage systemare connected to others, but they
can behave as if they were a single, integrated system. This is
done with a bit of software that keeps track of all of the components and ties them together with a high-speed network. In
a virtualized system, some of your records may be stored on a
system in Oregon while others are stored in South Carolina;
you do not know and you do not care where they are, because

The Three Questions

The message in these examples is that technology fuels the
growing service-infusion trends we see today in every industry.
You cannot speak meaningfully of service infusion without talking about communications technology. So what? What does
this mean to you as a marketing thought leader?
1. How up-to-date are your technology-by-strategy
skills? Do you know enough about the available technology to
be able to innovate new service models?
2. In which service categories will technology have the
biggest impact? In other words, which industries or products
are most primed to go through the products-to-services transformation? What are the best practices in making this transition, and what are the traps?
3. How well do you apply technology in your research?

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when you want them, all of the records are presented to you
automatically.
Virtualization dramatically changes the economics of the
ICT industry. Computing becomes much cheaper because
there is less hardware, less electricity consumed, less cooling required, less real estate to house the machines and less expensive
labor to tend the systems. Lower costs mean that computing
power can be applied in more places, by more people in more
ways to create new value.
The change in technology also means a change in the
industrys business model. In the old days, customers assembled
their own ICT stack on their premises, just as you assembled
all of the components you needed on your desktop. In the
future, these computing services will be purchased on demand,
as neededor, in industry slang, by the drinkfrom superefficient service providers, such as a utility company. A few of
you may generate your own electricity with solar panels or
wind turbines, but most electricity is purchased from a utility
that owns massive generation and distribution capacity. You
buy electricity service instead of generation equipment, and,
increasingly, that also will be true of information technology.
This transformation is sweeping the ICT industry today.
All of the physical gear and software will be in the cloud, and
you will simply tap into the cloud with any Internet-connected
device you have at hand at that momenta browser operating on a laptop computer, smartphone or television or perhaps
from inside your automobile.
The word cloud is a reference to the way engineers
diagram network architectures. When one network connects
to another one, which is filled with its own complexities, the
architects simply draw a cloud to mean all the networks out
there somewhere. (See Figure 3.) Cloud computing changes
the way users consume information technology and converts
what has been a product industry into a services businessa
massive example of service infusion.

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Telecommunications has already created new tools and opportunities for marketing. We can create new ways to collect
data in real time, tie consumer behaviors in different environments together in a holistic pattern and deliver personalized
value propositions and messages precisely when they are most
valuable to the consumer. Is your research taking full advantage

Need More Marketing Power?

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marketingpower.com

AMA Articles
The Patient Connection, Marketing Health Services, 2011
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Marketing Health Services, 2011
AMA Webcast
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Opportunities and Obstacles of New Technologies, sponsored by
SSI, 2011

of these emerging capabilities?

My messages are threefold:
1. Technology disrupts traditional business models, some of
which have lasted for hundreds of years.
2. Service infusiona trend that most product companies
are embracing nowrequires technology.
3. It is time to re-examine our methodological tool kit to
see if we are using all of the available technology innovations
particularly communications and networking technologiesto
execute our research agenda.
Almost everything that marketing sciences has done over
the last 50 years can be done faster, more effectively and more
efficiently in the next 50 yearsthanks to technology. MM
This article is one of a series based on presentations from the
Marketing Science Institutes 50th anniversary conference, where
marketing thought leaders gathered to celebrate MSIs achievements
and explore the future of marketing.

R. GARY BRIDGE is senior vice president of the Internet business

solutions group at Cisco Systems Inc, based in San Jose, Calif. He may
be reached at gary@rgarybridge.com.

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