The Service Economy and What It Means for Your Business
By Team Bankmybiz.com
The US economy is undergoing a major transformation, and has been for some time. Gone are the days of labor unions and heavy manufacturing. We are now entering an era in which the service economy reigns. This has important implications on the health of our economy, the way we think about products and services, and how your business may evolve in the future.
Just a couple decades ago, the dominant industry in most states was manufacturing. Today, with the exception of just a handful of states, service industries are leading the charge. This part of our economy includes traditional consumer facing areas like restaurants and retail, as well technology driven areas like healthcare, financial services, and education. Firms participating in this evolution range from large corporations like technology companies deploying software-as-aservice solutions, all the way to small businesses like yours.
Why is the service economy important?
The ongoing transformation to a servicebased economy is a reflection of economic progress. Most developed countries make the eventual shift from commodity driven production (agriculture, mining) to industrial manufacturing to the service economy.
This progress helps build a healthy economy in two ways. First, it creates an economy that is diversified across industries and better suited to withstand the ups and downs of market cycles. When countries encounter economic slowdowns, they generally are too tied to certain commodities or too exposed to cyclical manufacturing, which can be painful if and when these end markets slow.
Second, the shift to the service economy creates a more balanced employment market with opportunities that cater to a wide range of skilled and unskilled workers. Essentially, there is a place for everyone in the service economy. The service economy creates opportunities for educated, highly skilled workers (healthcare, professional services, technology) as well as entry-level workers (tourism, retail, restaurants).
The service economy also fosters innovation and structurally changes the way we think about traditional career paths (for example, think about how technology and innovation spurred Uber). The bottom line: the service economy creates a robust employment environment, which may help explain why we are seeing continued improvement in the unemployment rate.
How is the service economy shaping our world?
New services are being launched and new categories are being created. We as consumers "need" things we didn't even know existed a few years ago. Think of the place that once "emerging" technologies have in our society today. Things like online banking, streaming music, etc. are now part of our daily lives.
The ease of use, convenience, and integration within our daily routines makes these services a part of our lives. Services like Uber, vacation home rental sites, online meal delivery, etc. cater to our need for constant connectedness, convenience, and also create new employment opportunities within our society.
What does the service economy mean for business owners?
In today's technology-enabled world, your customers have access to information at their fingertips and they are changing the way they think about spending money. Increasingly, consumers in a service economy value the "experience" over the "things." Whether your business creates experiences or sells traditional products, you can enhance the way you engage your customers. The bottom line: companies are having to think differently as consumer preferences are changing.
The value proposition of products and services is essential. Customer engagement and a focus on building relationships creates the repeat customer. Easy comparisons (online reviews, price comparisons, etc.) mean that you constantly need to evaluate your business strategy in the context of this ever-changing world. Utilize technology to your advantage whether it's online websites, apps, or social media platforms to engage with your customers and stay ahead of your competitors. Your business can grow and succeed in this evolving economy.
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