The Next Generation of Professional Services: Service Productization – Part 2

The what, why and how of productizing services

by Dave Hofferberth, Jeanne Urich and Carey Bettencourt, SPI Research

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In the first of this two-part series, we explored the services productization trend. In Part 2, we share our new Service Lifecycle Management Maturity Model™ (SLM3™) to help professional services organizations (PSOs) to start reaping the benefits of service productization. 

The service industry is buzzing about a new way to create, sell and deliver repeatable service products. It’s called “service productization.” Productized services present the allure of bigger sales pipelines, rapid deal closure, faster client time-to-value and improved project delivery quality. Based on our research, no other recent business topic has generated the same level of curiosity and confusion.

Introducing SPI’s Service Lifecycle Management Maturity Model™ (SLM3™)

0612 2We’ve learned that no single process instantly creates high-quality service packages. Many service product development teams don’t follow a service product development roadmap or approach service productization with the same level of discipline as product managers do. To fill this void, we’ve developed a five-phase, closed-loop Service Lifecycle Management Maturity Model™ to help manage the service productization process. See Figure 1 for the model.

We find that service productization is more successful when an organization uses a framework to choreograph roles and responsibilities and define clear outcomes by phase. This approach leverages knowledge and existing project artifacts. Speed and quality of service productization improve with experience. Each step outlines key decision points and deliverables that break the service productization effort into measurable and actionable components.

The five phases of service productization are:

  1. Innovate. Identify service product candidates, conduct research, analyze the market and fund the effort.
  2. Define. Plan the overall effort; define requirements and content; design service productization methods, tools and processes. Take an inventory of current assets to productize.
  3. Develop. Build service products based on best practices, consistent methodology, tools and templates. Test assumptions.
  4. Launch. Conduct beta test; assemble sales, marketing and delivery materials; train sales and service professionals; execute sales and marketing campaigns; and deliver with quality.
  5. Optimize. Develop measurements and rewards; collect feedback from sales, PSO and clients; identify areas for improvement. Propose significant changes and add-on services back through the Innovate phase.

Table 1 lists the deliverables and benefits of each phase of the Service Lifecycle Management Maturity Model™.

Table 1: SPI’s Service Lifecycle Management Maturity Model™ — Deliverables and Benefits

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Source: Service Performance Insight, June 2012

SPI’s Service Lifecycle Management Maturity Model™ success measures

To be successful, align your organization to ensure that each relevant function understands its role and obligations. When service organizations get serious about service productization, the initiative becomes the catalyst for an overall transformation. Effective service productization leads to a better way of doing business for the entire organization.

Service productization creates a business model centered on delivering maximum client value in the least amount of time. The process can be supported by a system including financial and project management, knowledge management and collaboration tools. Refer to Table 2 for each team’s roles and measurements.

Table 2: Service Product Teams and Measurements

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Source: Service Performance Insight, June 2012

Example of Service Lifecycle Management

Figure 2 represents a five-phase service solution delivery method. The chart illustrates how a company has productized defined service packages. First, the entire service lifecycle method was established then repeatable components were productized and tested in the field through many client projects.

A good rule of thumb is to start with service productization training. Then package client workshops and assessments. Develop and integrate repeatable workshops and assessments throughout the service delivery lifecycle. This approach facilitates ramping less-experienced PSO resources under the quality assurance guidance of senior PSO resources. These packaged services incorporate all core attributes, including contract templates to execute a legal agreement. A fast start package assumes that only out-of-the-box deliverables can be completed within a shorter timeframe than a typical full solution delivery.

Figure 2: Service Product Example

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Source: Service Performance Insight, June 2012

Common failure points

To reap the benefits of productized services, a PSO should spend plenty of time in the Innovate and Define stages of the process. Too often, service packaging teams jump into service development without developing a business plan or garnering cross-functional support for the initiative. The risks of failure are high without critical support, tools and cross-functional participation.

Without proper planning, executive sponsorship and funding, the risk of lackluster field and client acceptance or complete failure of a service productization initiative is high. The most common pitfalls we have observed include:

  • Inadequate executive sponsorship
  • Insufficient market analysis
  • Underdeveloped business case
  • Lack of competitive differentiation
  • No sales, marketing, training or launch plan
  • Unrealistic scope, time and budget
  • Insufficient resources or inadequate competencies
  • No beta or reference customers
  • No feedback or measurement systems or quality controls
  • No repeatable methods, tools, IP or plan for re-use
  • No understanding and appreciation for required organizational change

Properly executed, a successful productization initiative can deliver improved service performance, harvest knowledge to make it more profitable and improve overall operations all while delivering more client value faster.

Benefits of service productization

Global competition, a more sophisticated client base and a rapidly changing technology environment are increasing the pressure on professional services revenue and margin. A good way to respond to these external forces is by productizing services. Additional benefits include sales differentiation, repeatable quality service delivery, improved financial and operational predictability and greater value to your firm and clients. Predictable quality and results improve your reputation and increase the probability that your firm will be selected for future work.

By productizing services, the PSO can better prioritize the creation, management and improvement of its services portfolio. Marketing can build the appropriate materials to do a better job of defining and advertising the service portfolio. Contracts can be tightened and service level agreements considered. Accounting and finance can better forecast cash flow, revenue and profits. The consulting organization can better plan and schedule the workload to deliver high utilization, high quality and repeatable business.