Solutions: a new phase of capitalism?

Many businesses in the last decade have started using the word “solutions” to describe their approach and strategy. They contrast this to a “product” orientation. In a product orientation you start with what you make, and then you try to sell it on the market; in a solutions orientation you start by interacting with customers, understanding their needs, and then you try to figure out what value you can add. It’s a huge mental and organizational shift. Thirty years ago IBM made big proprietary computers, and its engineers concentrated on making them faster and more powerful. Now they provide a variety of “on-demand” products and services, with heavy reliance on alliances and open-source sharing, that they combine in flexible way around clients’ needs. GM s similarly trying to rework its model, from perfecting and differentiating their cars to providing transportation solutions. Indeed, one can see a similar move under way in practically every major industry.

It strikes me that this may be a pretty fundamental shift in capitalist markets. Think of Adam Smith’s definition of markets: you make something, then you sell it. As Marx put it, all you care about is the “exchange value”, what people will pay for it. But if you add this initial phase of collaboration with customers, and you add the need to form alliances and partnerships, you’re no longer in a simple market. What Marx calls “use value” –  the actual usefulness of the product – moves from the background to the foreground of the producer’s mind.

Middle-level IBM managers and engineers told me:

“Sometimes the solution will be an IBM product and sometimes the best fit for that customer will be a competitor’s products. I should think that what’s right for the customer even if that means IBM not getting some additional revenue. And I have done this a number of times. … What maximises IBMs revenue in the long term is helping our client succeed and making the best recommendation to the client that ultimately will mean that they have more money to spend on IBM elsewhere.”

“We want to develop a long term business partnership - not just somebody who comes and buys some servers, but we want to become business partners with the largest businesses in the world. I think the overall frame that all these things go into is long range thinking instead of short range thinking.”

Obviously there’s still a lot of short-term thinking in business. But this argument that there are solid business reasons to prioritize solutions rather than profit is rather new in the heart of capitalism. It’s a claim that you can’t really win on exchange-value without focusing first on use-value. This idea has spread across a wide range of companies and industries, including many of those with the highest gross margins. They believe, and seem to be demonstrating, that they are profitable because they are useful. That’s pretty radical.