Tag Archives: Mandarin Oriental

…Decomposing Businesses Into Services…

What kinds of services should hyperbusinesses offer through interfaces? This question can be a bit of a stumbling block for businesspeople still somewhat new to the transition to hyperbusiness. Nearly every business can be ‘disaggregated’, broken apart into a set of discrete and independent service offerings. This doesn’t involve a radical change to a business model, rather, it’s a way of rethinking the existing business.

Take, for example, the hotel room where I type these words. I’m in a room at the Mandarin Oriental Bangkok, considered to be one of the finest hotels in the world. Certainly the level of service and attention to detail place this establishment into the very highest ranks of luxury hotels. But what is it, exactly that I am paying for? What services are the hotel providing to me in return for my daily rate?

Here’s a list, which is not meant to be utterly exhaustive, but gives an idea of what a business looks like when decomposed into services:

  • Room rental (50 m2 overlooking the Chao Praya river)
  • Furnishings rental (bed, desk, chairs, carpeting, art, etc.)
  • Bathroom toiletries & linen
  • Electricity
  • Air conditioning (vital in Bangkok’s tropical weather)
  • Water (both bottled and on tap, hot & cold)
  • Tea service (kettle and tea selection)
  • Television and satellite reception
  • Telephone
  • Housekeeping
  • Personal butler
  • Concierge
  • Ferry service (it’s quicker to move by river in Bangkok than by car)
  • Swimming Pool, Gym, Jogging track, Tennis courts
  • Newspaper

I do pay for each of these services, and the hotel certainly knows its cost to deliver each of these services. Even though this bundle of services has been presented as a single, unified service offering, it is really a composite of many services, each of which could be offered individually, or combined together in any appropriate bundle.

In addition to these services, there are a number of services that I can choose to subscribe to, but which are not aggregated into my daily room rate:

  • Minibar
  • Room service
  • Massage & spa treatments
  • Airport limousine service
  • Dining in hotel restaurants
  • Drinks from hotel bars
  • Thai cooking school
  • Day care for the kids
  • Internet connectivity
  • Thai cultural programme

If the Mandarin Oriental Bangkok wanted, it could decompose my bill into a series of individual service offerings, letting me choose which services I wanted, paying only for those, but the packaging of these services into a daily room rate makes it easy for all concerned, particularly the accounting department, which would have to keep track of all of these service subscriptions for each guest — something not very difficult in the age of computers and networks, but nearly impossible just a generation ago.

If someone wanted to create a hotel that offered all of its services like this – entirely ‘a la carte’ pricing, you could imagine some interesting configurations: long-term residents might provide their own furniture, but subscribe to housekeeping services; short-term residents might take the room and furnishings but clean the room themselves to save some pennies, and so on. A few hotel chains – such as Malaysia’s Tune Hotels, where you pay extra for television, air conditioning, fresh bathroom linens, etc. – have already begun to decompose their service offerings like this, a bit like ultra-low-cost airlines, which charge you for every bag, every extra inch of legroom, and every drink. Now that it is possible, service decomposition has become the hallmark of hyperbusiness.

These decompositions are more than theoretical exercises. A well-planned and implemented decomposition activates value latent within an organization. Jeff Bezos, the founder and visionary behind Amazon.com, wrote a detailed memorandum to Amazon’s employees, instructing them to disaggregate the entire business. Every service Amazon provided had to be presented through a service framework – an API. (Bezos closed the memo by warning anyone who didn’t fall in line behind this strategy that they were already fired.)

As Amazon began the process of decomposition, the online retailer’s massive computing infrastructure – used to power its customer-facing retail division – stood out as a potential service offering. Amazon had much more capacity than it needed, in order to manage the huge traffic rush during the Christmas shopping season. Most of the year that capacity lay dormant, underutilized – while still sucking up electricity, cooling, and space within Amazon’s data centers.

Broken out as a disaggregated service, it became possible to offer that immense network of computers and storage to businesses that wanted inexpensive, reliable and scaleable computer services. A customer could subscribe to a single computer’s worth of processing power, but, if the customer’s needs suddenly changed, they could immediately and elastically expand the amount of computer power they rented from Amazon. It can all be managed through interfaces, so the computers themselves could decide to add more capacity when they sensed they were becoming overloaded, or shrink that capacity when they spent too much time idling.

This product – Amazon Web Services – touched off a revolution now known as ‘cloud computing’. Many of the Internet’s biggest business, from Twitter to Instagram to Dropbox, use Amazon Web Services because Amazon has already done all of the capacity building those businesses would otherwise need to do for themselves – with corresponding capital and human resources requirements. Instead of building a data center and staffing it 24/7 with anxious nerds, it’s possible for anyone to simply pay Amazon a rental fee, and have access to the same resilient network of computers which make Amazon’s website one of the most stable on the Web.

The biggest user of Amazon Web Services is the Netflix entertainment service, which streams movies and television shows to a compatible televisions, videogame consoles, computers, tablets, and mobiles. Netflix has proven incredibly popular – it’s estimated that as much as a third of all Internet traffic in the United States after 8 pm local time is Netflix streams!

Amazon also offers a streaming entertainment service – a direct competitor to Netflix – also running atop Amazon Web Services. Here’s an idea at the heart of a hyperbusiness: Amazon is enabling one of its competitors with one of its own service offerings. That’s nothing to be afraid of. In fact, it should be embraced. It is the ultimate validation of a hyperbusiness’ service offering when a competitor chooses to use it.

Amazon may not win in the streaming entertainment business, but they’ll still be making plenty of money, supporting Netflix – and every other company that wants to compete with Netflix without spending tens of millions of dollars on a data center. Amazon Web Services has become the de facto standard for cloud computing, and Amazon has gone from being merely an online retailer to a technology company providing the support for a significant portion of the Internet. That’s the kind of latent value that gets released within a successful service decomposition.