Companies earn revenue and create value through addressing customer needs with products or services. Revenue growth rests, in part, with how its products or services fit with customer needs. The nature of those products or services influences revenue growth in the long term.
There are two basic types of products or services. Defined products or services have known features and functions. The better those features and functions fit customer needs, the greater a defined product’s future revenue potential. Most companies sell defined products. Think of an automobile, a restaurant meal, a computer, a piece of software. These are things that have known – defined – features, functions and properties.
Generative products or services are not limited to their defined properties. They can be whatever you can build out from them. The ability to do more than what they were defined to do. The result is value from capabilities that did not exist or could not have existed within the limits of a defined product. Extending a piece of software and using it in a way in which it was not intended is an example of a generative solutions. Most ‘hacks’ into defined solutions are also generative. The most valuable type of generative solution is on that gives your company a new capability that no one else has or may even have contemplated. On click buying is an example.
The world runs on defined and generative products or services
The world needs generative and defined products or services. One is not necessarily better than the other, they are just different. Take a conventional automobile and a Tesla. Both provide transportation. Both rely on physical parts such as the motor, wheels, etc. Both rely on software too. But they are not the same.
The conventional automobile is a defined product. Its capabilities exist within a specification controlled by the manufacturer. The Tesla’s specification is controlled, but the product is more generative as software changes can redefine or give it new capabilities more easily than its conventional counterpart.
Consider the autopilot feature. Autopilot is possible in both a conventional car and a Tesla. Getting autopilot in a conventional automobile requires buying a new automobile – one in which autopilot is a defined feature or function. For a Tesla, autopilot comes with a software download, no need to purchase a new Tesla to get a new feature. That ability to build new capability on top of things is what makes the Tesla a more generative product.
Defined and Generative in High-Tech
The difference between defined and generative products is one of degrees, particularly in high tech products and services. High tech products create value based on their ability to process information or operations managed by software. Change the information, change the software and your high-tech product takes on new characteristics. In that sense it is generative. The increasing use of ‘software defined’ things makes high-tech more generative, but not everything defined by software or the software itself is generative.
Generative products are more than extensible. Defined products are extensible too, by purchasing other defined products or following configuration or customization rules. For example, adding modules of a software suite. The solution is extended in its coverage, but the way it creates value is still defined within the product and under the control of the software maker. Think of it another way – you have to ‘jailbreak’ something then it’s a defined technology.
Generative products are extensible without central control. Anyone can transform their capabilities and value by adding or changing things, without limits. This makes generative technologies open in that sense as there is no one controlling how they evolve. Sure, there may be standards, but those standards support extensibility and interoperability for existing and new capabilities.
Think of the internet as an example. It has standards, but those standards do not control what is and what the internet can do. Anyone can get use internet technology in their solution without asking for permission. There is no jail to break and therefore their ability for innovation is greater than defined products.
In other words:
If the value of a product or service rests within the limits of what it can do, then it is defined. If that product or service requires tailoring to integrate it into a customer’s environment – make it run better, then it is defined. If the manufacturer controls the ability of others to build or change what it can do, then it is still defined. Enterprise software, operating systems, non-software defined hardware, 5G and process automation are examples of defined solutions.
If the value of a product or service exists because you can create new things with it, then its generative. If those new things are not limited by the original manufacturer or other gate keeper, then it is generative. If in building these new things on top of a product encourages others to build more, then it is generative. Analytics, edge computing, the internet, biometrics are examples of potential generative technologies.
The figure below offers a way to consider the differences by organizing the distinctions into a 2×2 matrix.
Is the difference between defined and generative academic?
Yes, in one way as companies do not brand themselves or their products as generative or defined. One is not necessarily different than the other when it comes from getting today’s job done. The difference comes in what is possible for the future.
No, the difference matters over time as generative solutions involve different investments, customer relationships and skills. Generative solutions grow and evolve differently than their defined counterparts. Generative create a different business model, one more readily adaptable for services and customer unique solutions.
There are differences and they matter. Understanding those differences starts with a definition and description. Future posts will present positions around each with the goal of starting a discussion on what the future of these technology types means.