Ensure that your organization sees success in service productization
by Carey Bettencourt, Service Performance Insight
Over the last year, my team at Service Performance Insight (SPI) has worked with dozens of companies and trained hundreds of professionals to implement sustainable service productization, or packaging, programs.
Lesson 1: “No market, no money, no mission.”
First and foremost, many services should not be packaged.
Service packaging investment requires an overall business plan and a business case that outline the target market, competition and your differentiation. Service packages must be services that can be successfully sold and delivered for tens, if not hundreds, of clients. If the problem is not urgent, not pervasive and clients are not willing to pay to solve it — don’t package it!
You must have a compelling answer to the question “Why should we package this service?” Too often firms begin packaging services to correct internal problems. Instead, focus should be on the market and the
pervasive business problem the service solves.
Companies would never dream of developing a product without an understanding of the market. So the same standard must be applied to services.
Lesson 2: “Walk before you run.”
Product management has come into its own as a specific function and discipline to ensure that products are developed with the client in mind and based on sound market and competitive analysis. That said, service productization must attain the same level of focus and specialization to be successful. A key finding is that service productization relies on and requires sound fundamentals to be in place in product management, marketing and solution selling — all disciplines which typically sit outside the professional services organization and its core service delivery competency.
At the same time, the PSO must have attained at least Level 3 (Project Excellence) PS Maturity in the Service Execution Pillar with fully deployed systems and processes for service delivery methodology development and enforcement. Professional services automation and knowledge management systems must exist to provide the service productizing team with insight into project artifacts and best practices. Further, the PSA solution is required to measure compliance and productivity improvements.
Lesson 3: “Implement a structured service packaging method.”
Based on our research and consulting experience, more than 80 percent of initial service productization attempts fail to achieve hoped-for objectives. Key root causes include ad hoc approach, lack of executive commitment, no dedicated roles, and no program vision or clarity.
To improve the success rate and shorten the time to value of service product development, my team developed the SLM3 framework, as shown in Figure 1, a methodology and tool kit that enables the service product team to implement a holistic and sustaining service productization program.
Implementing this framework compels the service product team to pursue a disciplined approach to establish the following:
- Articulated and well-understood services strategy.
- Service productization program vision.
- Active executive sponsorship.
- Market-driven focus.
- Global company adoption of program.
- Dedicated resource commitment.
- Cross-functional participation.
- Common sales and delivery methods, tools and templates.
Figure 1: SLM3 Framework
Source: Service Performance Insight, 2013
The contents of SLM3 include:
- Critical success factors. The required conditions for service productization success.
- Organizational structure. The teams, hierarchy, roles and responsibilities leading and supporting the program.
- Program foundation. The critical service productization program capabilities and activities — project management, change management and portfolio management — that are required for startup and ongoing program operations.
- Service productization methodology. The five-phase lifecycle process that compels the team to develop a strategically aligned, market-driven and high-quality service product focus.
Lesson 4: “Incorporate change management.”
Based on my team’s years of service packaging experience and research, I believe that organizations should approach service packaging as a transformational change to the traditional way companies currently sell and deliver services. Service packaging requires cross-functional disciplines to work together to define a consistent approach to selling and delivering in-demand services.
I suggest organizations think of service packaging as a new and better way to develop solution value capture, which requires behavioral changes. In order to gain organizational buy-in and support, it is important to launch the program with clear communication, incorporating answers to the following questions:
- Why are we doing this?
- Why are we doing this now?
- How will we work together?
- How will this impact me?
- What do I need to do to be prepared?
Effectively communicating the program’s important purpose and stakeholder’s role will not only create a positive perception, but it will also accelerate service packaging program support and participation.
Lesson 5: “Name that team!”
Successful service packaging requires a long-term view with dedicated, empowered and experienced team members; executive and cross-functional support; and consistent long-term funding.
Committing the required resources and placing the right people in the right roles is a critical success factor for this program. In fact, inadequate resource commitment will lead to frustration with the service packaging effort and results. And not assigning and aligning qualified people to program roles will lead to individual and team anxiety and, most likely, lack of productivity.
Expectations that service packaging will provide a quick fix for effective solution selling or service delivery consistency are false, but the effort is worth it if organizations go into it with eyes wide open.
The only way to guarantee success is to follow a service lifecycle management methodology that clearly outlines the program charter and governance structure for decision-making and funding. Clearly defined and empowered teams should be assigned. Appropriate measurements, metrics and compensation are needed to cement the program into ongoing operations and measure progress.
Lesson 6: “The proof is in the numbers.”
Following the development of the Service Lifecycle Management Maturity Model, my team scored 102 survey participants in the 2012 benchmark. The most mature firms follow a disciplined, methodical, market-driven approach to packaging services and deliver excellent financial results.
As presented in Table 1, the revenue and profit key performance indicators for the most mature firms show material differences between the lowest two levels of maturity and those that are at Level 5. The numbers in the colored boxes represent the percentage of companies that are at each maturity level.
Table 1: Service Lifecycle Management Maturity Model Metrics by Maturity Level
This table should remove all doubt about the efficacy of service lifecycle management, as the most mature are able to achieve superlative net margins while exceeding their annual revenue and margin targets.
The value of productization
Productizing services is difficult. But more than likely it is necessary in an era of greater service complexity, global competition, economic indecision and a more enlightened client base. Properly managed, investments in service productization can pay off handsomely — with significant improvement in margin, revenue per person and ability to manage larger projects.
I hope that sharing these lessons learned helps your organization better prepare to launch — or improve — your service packaging programs.