Laurie Young investigates Unilever's Myhome, an attempt by the FMCG company to launch into services
In the late 1990s traditional product-based companies were under assault from investors enamoured with the then-seemingly unstoppable advance of the dot.com companies. For example, at the beginning of 2000, consumer goods company Unilever blamed this in large part for the decline in its share price by about 40%.
But there was more to this than the love affair with the 'new economy' technology companies. The market for branded goods was becoming increasingly competitive and cut-throat, as retailers tightened their grips on the supply chain and put downward pressure on margins. A company like Unilever had to find new ways to generate growth and connect consumers with its brands.
It had been laying the groundwork for this. In 1998 it had set up "Project Foresight", staffed with young managers who were charged with researching potentially lucrative trends that the company could exploit. One of their findings was that consumers would increasingly favour services over products, with cleaning products, for instance, only a means to an end. Unilever thus decided to experiment with extending its business beyond manufacturing and into services.
The result was the launch of a pilot project called "myhome" in March 2000, a premium cleaning service aimed at the cash-rich/time-poor consumers in an affluent part of London. With an initial investment estimated at about £5 million (this included the acquisition of two other home cleaning services), this was not only seen as a way to raise the profile of Unilever cleaning brands, but also to tap into the UK cleaning services market. That market was then estimated to be worth well over £1 billion and growing strongly. The business would also give the company first-hand research that would feed into new product development.
This was a brave move for a company with little experience in managing a service business. And it didn't take the company long to realise the skills demanded by this sort of market were much different from its traditional business model. Within 18 months of the trial, and well before its original deadline of March 2003, it decided to sell the business to a home and fabric cleaning service, Chores, which covered southeast England. This coincided with the end of the dotcom boom, which meant that the pressure on the share prices of traditional companies lessened considerably.
Chores has since expanded the Myhome residential cleaning brand through a network of franchises, backed by a well-established support system from the parent company. Unilever, meanwhile, has returned to focusing on its core skills in brand development, although it has retained a small stake in myhome to continue to benefit from customer insight.
This is an edited extract from Laurie Young's latest book, From Products to Services, Insights and experiences from companies which have embraced the service economy, published by Wiley, £29.99.