Donner Party or Gold Rush? Part 2

Where to start in service productization
by Jeanne Urich, Dave Hofferberth and Carey Bettencourt, SPI Research

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In the first of a two-part series, we covered the movement to productize services and its similarity to the Donner party and gold rush, based on the early results of our 2012 service packaging benchmark study available in September 2012. Here we discuss where to start because taking the first steps in the right direction is critical to establishing a successful service productization program.

It makes sense to build service products in the same way that companies develop, sell and manage manufactured products throughout their life cycle. Unfortunately, many organizations have initiated service productization efforts with limited market data or very poor information. Your organization must start with the client’s pain and answer the following questions to assess the opportunity and validate the market for your proposed service product.

  • Will this service product eliminate a significant problem or pain for my clients?
  • How urgently do my clients want to resolve the problem?
  • Where are our products and our proposed service product in the life cycle of the market (growth, mature, decline)?
  • Do we provide unique, differentiable capabilities to resolve the problem?

In many cases, great ideas have no immediate market. Therefore, the creation of service products makes little sense and moves the organization away from serving more pressing client needs.

Because of this, a professional services organization (PSO) should look at the types of work it currently provides and evaluate its importance to the client base. While no two clients are the same, many of their pains are sluggish sales, reduced profits, no coherent strategy, organizational inefficiency, poor quality, regulatory scrutiny and many others mandating the need for your organization’s expertise.

Establish executive sponsorship

Many of the organizations that we’ve surveyed and interviewed have started establishing service productization initiatives. Some initiatives launched in the service delivery arm of the organization, while sales or marketing established others. The need for service productizing made sense to these organizations, and many invested a large amount of time and effort in its development.

Unfortunately, most of these same organizations failed to gain active executive sponsorship within professional services and other key departments. This executive support is a critical success factor, as it drives resource development commitment and participation, sales promotion, and delivery adoption of the service product.

Senior executives who understand the benefits and the process required to initiate service productization are in a stronger position to sell and implement the program across the entire organization. Without this support and leadership, it doesn’t matter how well-structured; the service packages are. Those will never receive critical acceptance from the entire organization and will fail.

Involve all relevant parties

Following the establishment of a senior leader to oversee the service packaging effort, PSOs must build a team with representation from the various departments within the organization that can affect the service’s success. These departments include marketing, sales, service delivery, partner management, human resources, finance and accounting, legal, procurement, and potentially others.

While every department might not have the same level of involvement and responsibility, each should be consulted to ensure service products are well constructed, have the necessary assets (people, material and equipment), financial backing and value; and will be delivered with the highest levels of quality. Creating service packages heightens the understanding and awareness of the importance of services by others, unlike one-off services. Hence, every individual on the team must have a seat at the table to make sure the service product is conceived and implemented well.

Clarity helps drive the optimal outcome

Once the professional services organization has the right people on the team, it’s critical that the team has a clearly defined process for the development and implementation of service products. We have developed and implemented a service life cycle management methodology in many organizations. Your organization may have its own method and processes. Regardless, the processes involved must provide clarity in service product development and help the organization understand the role and responsibilities in the service productization process and contribution to its ultimate success.

The leader of the team should have a documented process complete with steps required to build service products and specific evaluation criteria for every step. The clarity of this process provides every department with an analytical framework to evaluate and determine whether the service productization process should continue. It’s critical the process have several evaluation checkpoints to make go or no-go decisions. These ensure that the service product has quality built-in and is positioned for financial success.

How to increase your organization’s success rate with service productization

Service productization isn’t a new concept. For the past decade, many service organizations have considered it and many have successfully implemented it. However, going from idea to implementation takes a significant dedication and resources to achieve success. Our research has shown it will become an increasingly important component of your organization, as technologies, regulations, globalization and services become more complex.

Service packaging begins after identifying a client’s pain, attaining executive sponsorship and establishing the service packaging team. Many others within your organization will become active participants during the process. The potential for success depends on the buy-in coming from across the organization.

“Thar’s gold in them thar hills!” But there are also many traps that could ultimately doom your organization as it moves toward service packaging. Let your organization’s efforts lead to riches, not ruin! As with prospecting for gold, luck and timing come into play. However, preparation, organization and leadership will improve your organization’s chances for success.