Turning Services into Product: Six Product Management Tips for Service Companies

Product management must be applied when a service company wants to build product to add value to their service.

Recently I was working with a firm that makes most of its revenue from providing a very specific service to its customers. The service is very data intensive. The service provider leverages technology to make it easier for customers to work with and analyze that data, but at the end of the day the data itself is not exactly at the core of what the service provider does. Until recently that is. As this particular service provider’s market continues to heat up, and their services are pushed further and further along the dreaded road to commodization, they have been looking for ways to tap into the natural value that their data represents. The answer has been to throw development at the problem and bundle the product along with the services. It is a classic defend your market share move. Your service margins are eroding and likely to never come back? Productize the service and do it quickly.

Now to be clear I am not at all suggesting that such a strategy lacks merit. On the contrary, diversifying a service portfolio with a product portfolio increases the value of services and generates new streams of revenue. The problem begins, however, when service providers attempt to apply service oriented tactics in their strategy execution. In this particular example the provider is in complete reactionary mode to their customer base. The product they have built to allow their customers to perform a high degree of analysis for the sake of increasing business intelligence does not solve any one single problem. Rather, it scratches the surface of a multitude of problems. Worse, when their larger customers speak loudly about some issue they desperately need resolved the service provider reacts by immediately addressing the problem with more code. The result is rarely a product feature that nails the requirement and delivers that intended value, but instead a poorly designed cobbled together attempt that ultimately leaves the customer feeling at best frustrated and at worst betrayed.

So what then can service providers do to successfully create value added products for their customers? Following these steps will ensure that product development efforts are well defined, well targeted, meet the needs of the intended user, increase overall value to the service customer and create a streams of revenue.

What is the problem? It is tempting to simply develop functionality based upon the data you already have on hand and your current understanding of your customer. Mistake! You know the customer from the perspective of the service you provide. The question you must ask is ‘what are the problems that my customer faces beyond the service I provide?’

Start listening Adequately trying to identify the problem should reveal to you that you really don’t know your customers from the this particular perspective. So you need to start creating opportunities to listen to them. This only happens if you start the conversation. Start with some of your strongest customer relationships. Let them know what you are about to undertake, and ask for their help. How many? As many as you possibly can.

Write the requirements: Once you have conducted a fair share of listening only then is it time to put pen to paper. Literally write out the major problems customers want solved and then meticulously write examples of real situations where they need a solution. This is basically called a marketing requirements document and use case.

Prioritize: Let’s say you defined 8 specific problems that customers have that you believe they would pay for a solution. Force rank these from 1 thru 8 in order of importance to the customer. , and then determine if any can stand alone. So go down the list and ask of each item, “ok if just this one problem were solved would that be enough to be a product the customer would find valuable?” The result should be finite solutions that will drive functionality

Focus: This step simply will not work if the previous four were not taken. With the viable product functionality defined in prioritization you must make a conscious decision to not be distracted away from what has been defined. Again if the first steps were well executed you know there is a market for the solution you are building. So the fact that it might not do Y is ok because you have set out to solve X

Create the message: Perhaps one of the trickiest elements for a service company is the ability to grasp the need to message a solution, to adequately communicate to the intended buyer what is solves and what value it delivers. Failure here places you at the mercy of the whims of your early adopters. If they don’t understand that the product was built to solve X they very well may hound you for ‘fixing it’ so it does Y.

These six steps, if followed will get any service company off to the right start when entering the world of product. But beware. They are labor intensive and can be time consuming. If there is a lack of appetite to seriously invest the time necessary to take these steps than perhaps the better question for the service company might be, “do we really want to be in the product business?”