The Transformative Benefits of Productizing Your Business Model

Professional service firms are largely allergic to the concept of productization.? They operate with the belief that everything they do is unique and that all client work is custom.? No doubt professional firms bring bespoke thinking to every engagement, but these engagements almost always follow a framework; a set of steps that constitute a roadmap for diagnosing problems and prescribing solutions.

By codifying these roadmaps, organizations like advertising agencies, law firms, and accounting consultancies can reframe their competencies as programs or even products.? In place of a bullet-point list of services (which are generally widely available from similar organizations), firms can creatively bundle and recombine their offerings as named, productized programs.

No more circular conversations about costs

Not only are these programs easier for clients to buy, they also provide significant internal advantages for the firm.? For starters, products immediately change the focus from inputs to outputs.? Instead of a circular conversation with clients about the amount of people and number of hours (a by-product of the hourly rate system), you’ll be talking with your clients about what they really buy: actual deliverables and program elements.

Because they are repeatable, productized programs provide reliable information for forecasting, allocating and managing internal resources.? This in turn improves the firm’s ability to manage and prioritize workload and workflow, because it redirects project management away from “time spent” to outputs delivered or outcomes produced.? “Products,” observes agency professional Trevor Hubbard, “will instill checks and balances to our historically uncheckable business.”? This streamlined approach to service delivery makes scoping much faster and effective.? In new business, says Hubbard, “Response will speed up because you’re not constructing from scratch and diverting resources to the latest pitch.”

Finally, true economies of scale for professional firms

Economies of scale, which historically have eluded the professional services, business, manifest in the form of faster forecasting, more rapid delivery, and reduced costs in the area of scope management.? Firms that operate in a productized model are able to devote fewer resources to project management, because the steps in program delivery are clear to everyone on the team.? The professionals working on the engagement are better able to manage their own work and are less reliant on project or resource managers.

A product-led business creates a genuinely scalable business model.? Under the hourly rate system, firms are limited to linear growth; to increase revenue, the firm must increase staff.? But productization opens the door to exponential growth, where the firm is able to add to its profit pool by leveraging the intellectual capital that already resides in the firm — growth achieved in the same way as other modern businesses that are not tethered to the concept of billing for time.

Flipping the script

An independent New York-based firm called XenoPsi was able to change the dialogue with prospective clients by introducing a brand new suite of solution sets. The productization process, says agency head MichaelAaron Flicker, “Crystallized the vast array of processes that go into the art of creating producing, and distributing creative ideas into tangible, explainable, and demonstrable products that deliver proven outcomes.” The resulting collection of productized services sets up a win-win scenario for both the agency and its clients.? Says Flicker, “The brand can have confidence they are buying a ‘center of excellence’ that will deliver value because the agency has successfully applied it multiple times before."? From the agency’s perspective, the organization is able to avoid reinventing the wheel for each new assignment.

One of the most notable examples of productized services in the advertising sector is the agency Huge, part of the multinational marketing services organization IPG. ? Over the course of the past year, Huge reframed its entire set of competencies as a series of products.? Prospective clients are presented with three gateways through with they can engage Huge to help solve their business problems:

1. Experience Transformation. Make bold and transformative leaps forward in your brand and customer experiences.
2. Technology Realization.? Fulfill the promise and power of your technology investments.
3. Growth Creation.? Discover and unlock new frontiers of growth for you company.

Each of these three products is supported with a sub-set of solutions. For example, “Technology Realization” includes supporting programs such as Decision Pathfinder, Trapped Value Locator, and Capability Builder.

Huge CEO Max Baxter notes this type of reframing requires a shift in how the firm approaches client business.? “’We’re changing the way we engage with clients, abandoning the service provider role and becoming performance improvement partners. This means changing the nature of the relationships we engage in and the responsibilities we commit to.”? To accomplish this, Huge has engaged in a year-long reorganization of the firm’s structure so they can deliver their productized services on a global basis across the entire organization.

Only premium offerings command a premium price

The costs of administering programs (versus clients incessantly picking and choosing individual services) are much lower, which significantly reduces the overall governance cost of the relationship.? In place of constantly? estimating, tracking, reporting and reconciling hours, the firm is engaged in activities that actually benefit the client; applying their expertise to delivering innovative thinking.

Finally, productization presents a significant competitive advantage.? While numerous other firms can copy and offer commonly available services, it’s much more difficult for competitors to duplicate a bespoke program.? An inimitable suite of high-value programs presents your firm as a unique choice in the marketplace, which help accomplish the ultimate goal of productization: premium pricing.

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Tim Williams?leads?Ignition Consulting Group, an international consultancy that advises?agencies and other professional service firms in the areas of business strategy and revenue models.?Tim is the author of several books, including "Positioning for Professionals: How Professional Service Firms Can Differentiate Their Way to Success." Tim also writes a monthly blog,?Propulsion, and shares insights on Twitter?@TimWilliamsICG.