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Service Productization
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Introduction
Professional services clients seek solutions to problems, and the very nature of intangible services makes them difficult to comprehend - they cannot be touched, tasted, or seen. Consequently, clients often seek various forms of assurance that their problems can in fact be solved by the prospective supplier of professional services. They seek
to understand client references, examples of work completed, industry expertise of individual service delivery personnel, and various other - features - of the proposed solution.
Professional services firms can alleviate some of these concerns by attempting to attach more tangible features and benefits to their offerings. In so doing, they can put the prospective client more at ease during the buying process: physically holding a brochure seems to make the service more "real"; establishing a fixed price reduces
the risk of runaway costs; identifying the actual names of people who will do the work adds credibility that the supplier will actually meet its obligations.
These are all ways of productizing professional services - resulting in performance improvements, both in selling and delivering professional services.
Professional Services - Why Productize?
There are essentially four key reasons to consider productizing service offerings. Advantages can be realized in sales, marketing, service delivery, and overall economics.
- Productization of professional services offerings can be extremely valuable when trying to establish credibility with a new prospect or client.
- Productized services are easier to explain to the sales force, and therefore can make sales personnel more productive.
- Productization can improve differentiation for service offerings that are becoming commodities.
- Productization supports consistent and repeatable service delivery, which in turn:
- Increases customer satisfaction
- Improves profitability
Credibility
"Customers must experience the intangible service to really know it. Intangibility makes services more difficult to imagine and desire than goods...Customers? perception of risk tends to be high for services because services cannot be touched, smelled, tasted, or tried on before purchase."¹ The intangibility-of-services problem is a
particularly vexing one for the professional services firm. This is because the stakes are often high for the prospective client of professional services: a failed IT project may cost millions; a tricky legal matter might result in significant damages; poor accounting advice could lead to criminal charges. As a result of these high stakes,
prospective buyers of professional services want evidence - or at least some assurance - of probable success.
At the root of this need for assurance is credibility - credibility of the firm, of the people in the firm, and of the service offering itself. By productizing a service offering, the professional services firm is, in effect, improving the credibility of the offering by making it more tangible, thus providing a glimpse into the actual service experience.
Consider an accounting firm with a productized offering called "Tax Optimization Review":
Service Offering - Tax Optimization Review
Benefits - After completion of the project, the client will understand how to operate administration duties differently,
resulting in a lower overall tax rate.
Features and Attributes:
- Two seasoned tax accountants as/signed for three weeks; both CPAs and CFAs, one with more than 10
years of tax planning experience
- Total cost: $48,000
- Project plan consisting of three one-week phases: Inventory, Analyze, Conclude
- Interim deliverables to include weekly status updates, a preliminary findings summary, and a midpoint
scale assessment
- Final deliverable to be a recommendation of financing strategies, contract terms, and import/export policy
References - Similar projects were completed for regional retailers, an industrial exporter, and a large direct
marketing firm.
The list of credibility factors could get quite long, and yet the exact nature of work completed as part of the project
would differ significantly from prior projects due to differences in business operations, personnel and skills, and so
on. As such, the productization effort will not ensure that duplicate projects will be completed. It only attempts to
minimize the differences among projects.
Sales Effectiveness
Professional services firms are increasingly looking to professional sales personnel to drive revenues. These sales
personnel often do not have the service delivery experience to truly understand the nature of the service they are
selling. This gap in understanding can result in customer satisfaction issues, unprofitable client engagements, and
poor sales performance.
Productization of services can aid the development and documentation of key selling points and value propositions
that sales personnel can use to improve their performance. Consider a management consulting firm selling
strategic planning process design services.
The pain sheet outlines the connection between the client?s pain and the potential solution. And the nature of the
solution is clearer for the sales representative to describe as a result of the productized features of the offering,
Dynamic Strategic Planning Services. For example:
- Initial assessment complete in 90 days
- Staffed with personnel from the client?s industry
- Plan revisited quarterly by a joint client/consultant team
- Sample meeting agendas and deliverables completed in advance
Differentiation Through Productization
Professional services firms that find themselves positioned toward the back end of the professional services
lifecycle may find that productizing services can help them prolong the profitability associated with their
services ²'
Recall the Web design services firms building Web sites for clients in the mid to late 1990s. At that time,
developing a Web site was a very new capability. Not enough personnel with the proper skills were available to
do it. Rates were very high, and buying decisions were made largely on design firm reputation and the experience
of the individual personnel in the firm.
As the market for Web design services matured, new tools became available, and more designers were available,
these services became near commodities. Purchase decisions became increasingly more focused on client
references and how quickly and inexpensively the work could be completed.
Thus firms that attempt to extract more premium pricing can attach features like guaranteed delivery dates, fixed
pricing, higher-quality methodologies, use of the latest tools, etc. in order to justify higher pricing. These are all
features associated with more productized services. As noted earlier, every engagement will be, in essence, a
custom delivery; however, by attaching standard features and attributes to the service offering, the Web design
firm is able to extract additional margin.
Achieving Repeatability through Productization
Repeatability is one of the keys to achieving scalable financial performance in the professional services firm
because it improves service delivery consistency and thereby improves:
- Client satisfaction
- Project economics (better estimating, reduced learning curves among service delivery professionals, and so on)
- Practice economics (better predictability across the portfolio of projects)
By productizing and associating tangible features to an offering, the professional services firm can help ensure
more consistent service delivery to realize these benefits. Predetermined templates for work products and
deliverables, standardized methodologies, and fixed pricing and staffing models are all examples of standardized
product attributes that can be assigned to service offerings.
Consider the example noted earlier, "Tax Optimization Review." The consistency of delivery for this offering could
be dramatically improved by developing a standard project plan, predetermining the type of resources to staff it,
leveraging scrubbed deliverables from previous engagements, and using pre-built executive interview sheets for
data collection.
This preparation could be completed on a project-by-project basis in order to manage project risk for any
particular engagement. However, by institutionalizing that discipline through productizing the offering once, and
then repeating delivery over and over again, risks and costs can be driven down for all similar engagements rather
than depending upon the preparation capabilities of the individual project manager.
How to Manage Service Productization
Various vehicles are available to productize professional services offerings. Much of the objective is to make the
intangible service more tangible, and therefore all of the "product features" described in this section represent the
creation of or reference to a physical thing.
Personnel
The most important tangible evidence of the productized service offering is the roster of personnel assigned to the
project. To the extent that this roster can be standardized and published (resumes, practice area summaries in
brochures, and so on) the service product gains credibility in the mind of the client. Further, if the skill sets among
personnel can be homogenous, then staffing risks go down and projects can be delivered with greater certainty.
Brand and Service Offering Labels
Establishing a product line brand that remains consistent can be an extremely effective approach to productizing.
Pittiglio, Rabin, Todd, & McGrath (PRTM) is a mid-size consulting firm that has leveraged branding to makes its
service offerings more tangible for many years. As an example, their PACETM framework for improving product
development processes is known to hundreds of companies worldwide.
This approach not only improves overall firm awareness, but also conjures up in the minds of prospects images of reference clients that have already experienced the PRTM service offering.
Marketing Collateral
With or without strong branding, simple documentation in the form of brochures, white papers, or case studies that reference a particular service offering or product line lends credibility to the professional services provider. By documenting the project approach, sample clients, and graphics of results achieved, the professional services firm can breathe life into a previously one-dimensional service description.
Methodology
One of the most important elements of productization for service delivery purposes is a well-conceived and
standard approach to service delivery. Documentation of de facto project plans, sample deliverables, project
team organizational charts, problem-solving approaches, and other elements of methodology are used to
establish credibility with clients both during the sales process as well as during early phases of delivery.
By exposing the client to pre-packaged project plans, the resulting clear message of, "we have done this before,
and here is the evidence of that," can go a long way toward gaining client buy-in to the service professional?s
approach.
Price List
Establishing easy-to-understand fixed pricing for a collection or bundle of professional services can help
productize a service offering. A professional services firm that presents a predetermined price sends a message
that the work has been done before, the cost is well understood, and this is how much is needed in order to
make money on the deal. This "product feature" helps mitigate many client concerns about how they can
manage their financial risks.
Physical Location and Other Physical Assets
Physical offices, and in the case of IT related services firms, technology showplaces, can serve as a
mechanism for productizing services - particularly if the work is planned to be performed in the service firm?s
facilities.
Imagine the difference from the perspective of the client meeting one bidder in an airport conference room
versus meeting with a competing professional services firm in a 10,000-square-foot design center facility with
100 PCs and endless white board space distributed across the oversized room. In this example, the space itself
becomes part of the overall offering.
The Productization Trap
Productization of service offerings is not all good news. One potential trap is that sales personnel will begin to
lean on the easy-to-understand product attributes too much. It is important to remember that services are
always custom to a large extent. As noted earlier, no matter how productized the collateral, methodology,
physical location, and other elements appear, the actual services delivered will differ due to the specific needs
of the client in their particular circumstance.
"Services are highly variable, as they depend upon who provides them and when and where they are provided."
Sales representatives that use productized features as a crutch to sell may forget that they are really proposing
a solution to a customer?s unique problem. And when selling a solution, it is important to maintain flexibility as
the nature of the client problem unfolds. A productized service offering must still be tailored to meet the
prospect?s distinctive needs.
Systems Impact on Productization
In addition to changes in strategy and process described above, investments in technology can play a role in driving
service productization. Automated collection of time and expense, centralized knowledge management, and team
collaboration infrastructure can support an effort to institutionalize service productization.
- Data matters - collecting and analyzing project cost and billable hour allocations on past projects will lead to confidence and proof points when establishing standard pricing for a particular service offering. Further, regular reporting of project profitability can be leveraged to validate project pricing as the work for an actual engagement unfolds.
- Centralized storage and retrieval of pre-packaged project plans, deliverables, and proposals from past engagements will accelerate sales and delivery activities while demonstrating credibility to clients (demonstrates use of standard methodologies).
- Skills databases can be used to quickly identify available and appropriate individual to staff on a "packaged" engagement.
- Sophisticated invoicing systems that permit milestone and/or risk adjusted billing will help ensure timely collections for productized projects that are delivered.
- Predetermined project plans and/or generic methodologies stored in either a database or MS Project templates can be used to establish credibility and improve repeatability when they are actually used as first draft client project plans. Further, if time and expenses can be tracked to project sub-codes that are linked to standard methodology, then data can be used to evaluate accuracy of pre-packaged pricing.
Summary
Professional services firms generally solve client problems, and no client problem is ever exactly the same. As a
result, the actual service delivered for every client is customized to some extent.
However, significant benefits are gained by the professional services firm that associates product features with its
services offerings - performance improvement can span sales, marketing, service delivery, and economics. These
benefits are particularly attractive to professional services firms that find themselves positioned toward the latter
half of the professional services lifecycle.
Productization of services is accomplished largely by associating tangible features with intangible service offerings.
These tangible features may take the form of personnel, collateral, methodologies, pricing, facilities, or other
attributes. By associating tangible features with intangible services, the professional services firm can build client
confidence during the sales cycle as well as during the service delivery phase.
Automation tools like Enterprise Services Automation, database, and project management tools can serve as
enablers to service productization, playing an important role in execution. The overall effort may be significant, and
moving in this direction is not risk free. However, many firms will find the results to be well worth the effort.
About the Author: The author, Joel Radford, is the founding principal of JB Radford
LLC, a management consulting firm advising top management of services and
technology clients seeking practical solutions.
¹Marketing Services - Competing Through Quality; Berry and Parasuraman; 1991
²David Maister offers a useful framework describing the professional services lifecycle in his 1993 book, Managing the Professional Services Firm. Mr. Maister suggests that
service offerings become commodities over time, and that firms must manage the lifecycle differently than product firms since the people delivering professional services
themselves can be thought of as the products.