The service industry has evolved continuously over the past three decades. At every step, the underlying ethos aims to enable client success. This is forcing service providers such as freelancers, agencies or consulting companies to continually reinvent the way they work. Productization of services – i.e., offering a service-as-a-product or productization – is an increasingly popular way of realizing this ethos here and is one of the major trends in the industry.
What is service-as-a-product or productization?
The term productization is appearing more and more frequently in the service sector. It refers to the process of developing a service into a product. The line between product and service is becoming more blurred than ever. But in order to recognize and exploit the true potential, freelancers and service companies today need to make structural changes, develop a “product mentality” and build internal product organizations that focus on this niche. So once again, the service industry urgently needs to evolve and transform. Productization is a promising path.
What productization means in concrete terms
Services can be made productive, packaged and marketed just like physical products. Service-as-a-product or productization here represents the process of developing or modifying a process, idea or service to make it marketable for sale to the public. By transforming intellectual capital or knowledge into a product, customers receive a cohesive and standardized step-by-step guide to solving a specific business problem. This empowers them to work on their own to a high degree – without requiring methodological expertise. It makes no difference whether customers come from the same or a completely different industry.
Transparency from the start
Service as a product makes it possible to present the services clearly before customers allocate resources to them. Potential customers can thus better decide whether the product is the right solution for them and whether they want to use the service. They know from the outset what the end result will be and how much time and resources they will need to achieve it. The appropriate tools needed before starting the project, as well as individual instructions for each project phase, content descriptions of the procedure, and all documents (e.g. templates) and information about helpful digital tools to support them are delivered to the customers. This gives them unprecedented transparency and enables them to work independently, efficiently and flexibly.
Whereas most services involve working closely with a customer to create an individual and precisely tailored solution, productization generates a solution for a large number of buyers. Instead of a customized service, a pre-defined process delivers the same result for every customer.
In essence, then, service-as-a-product or productization is about reusing a customized service that has already been provided to a particular customer and turning it into a standard product.
Ideal complement to classic service
As complex issues are difficult to map in a product, productization does not replace conventional, individual services. Services as a product are particularly suitable for smaller, self-contained projects and thus represent an ideal extension of the classic service business.
Service as a product holds enormous benefits
Service-as-a-product or productization offers potential for a real revolution. It not only delivers numerous added values for end customers, but also represents a strategic extension for freelancers and service companies.
Productized offerings offer better scaling potential compared to individual services. This is because the same solution can be sold to multiple customers with minimal time required for customization. It also reduces resource dependency.
Establishing a productized service offering that is easy to market also reaches new customer groups and thus supports greater market penetration. Service as a product thus creates an unprecedented opportunity to scale service business models.
2. Cost reduction through standardization
Preparing sales meetings, presentations and writing individual proposals are two of the biggest bottlenecks for service companies. Productization of services makes it possible to use this time for other tasks. Selling service as a product is a standardized and repeatable process that significantly reduces overall sales cycle costs and results in lower acquisition costs.
3. More capacity for knowledge development
Methods and expertise are among the most important assets for many service providers. At the same time, the half-life of knowledge is decreasing. Productization creates free capacities that can be invested in supporting new customers or new subject areas.
4. Incentivizing knowledge work
Productization makes it possible for the first time to market one’s own knowledge directly. In addition, the knowledge of all those involved in development contributes directly to the company’s success. This gives knowledge work a new significance.
5. Improvement through data and collective intelligence
Unlike an individual service, which relies solely on individual customer feedback, a service as a product has the data of multiple customers available. Their problems and approaches can be collected and analyzed in detail. This in turn enables continuous improvement of the product based on market and user data. As a result, the project approach becomes increasingly efficient from customer to customer. In addition, this approach enables effective risk management and avoids unnecessary expenditure of resources.
6. Radical focus on added customer value
Last but not least: customer benefit! At the heart of every service is added value for the customer. However, services are intangible activities that can neither be seen nor touched. This is scary for potential customers because they don’t know what they have bought until they actually use it. This fear delays the purchase decision. However, if you choose to productize and specifically define your service, it becomes much easier and safer for a customer to say yes. This gives customers unprecedented transparency and allows them to work independently, efficiently and flexibly. These are undeniable added values, which in turn become a real differentiator and competitive advantage for the service company.
More examples of productization can be found across all industries.