Services are always unique, non-standard experiences, while products are manufactured and thus always the same. Services are flexible and adaptable, while products are rigid. Why should anybody try to ‘productize’ services? Experience has shown that it makes business sense to productize certain services, or parts of them. The trick is to combine the best of both worlds.
The world-renowned service guru, Professor Christian Grönroos, criticizes the idea of services as products. “If flexibility and adaptability form the key sources of competitive advantage of services, what is the grand idea with eliminating or even reducing those capacities, instead of managing them?” he writes.
What Professor Grönroos suggests is that we should stop trying to make services look like goods, but instead systematize them in a customer-centric way. He would rather talk about commercialization of services. I totally agree, but I’ll use ‘productization’ because it describes the concept succinctly.
What is service productization?
A service consists of customer-specific unique features and processes that are basically the same for all customers. The idea of productization is to increase the portion that is systematized and repeatable in order to provide unvarying service quality in a productive manner.
Here are some examples of productized AEC services:
- An energy assessment of a property;
- A roof renovation for houses;
- An online customization service for new apartments;
- A facilities cost analysis;
- An analysis and planning service for new ways of working (NewWoW).
The rationale behind productization is:
A productized service makes the invisible more tangible and thus more marketable. You can describe your service outcomes, the process, and the value in a more precise manner than in a less systematized service.
Having a repeatable and predictable service reduces the customers’ risks. They can be confident that the outcome and value are as expected. This speeds up the sales process considerably.
When you have systematized your service you can manage it effectively, set measurable goals, and develop it systematically. The process becomes independent of the performance of certain individuals. A repeatable process increases productivity when you do it over and over again, and learn how to do it as efficiently as possible.
The pricing of a productized service offers new opportunities. Instead of charging by the hour or estimating a price, you can set a fixed price per service, or charge by person count, area unit, cost savings, and so on. The financial goal of productization is good profitability that is made possible by reducing your risk, as well as that of the customer.
Many companies created extra buzz around their service. A productized service can have a brand of its own. In fact the service becomes an asset that can be even traded or franchised, if needed.
What to productize
You could start by listing your existing services and analyzing them by asking the following questions:
- How many of them solve the same problem the same way?
- How well have you systematized them already?
- How unique or common are the needs of the customers of the services?
- Can the service be divided into parts or phases that could be productized individually?
- Could you use the same service products in more than one service?
While analyzing the way you work today you may discover opportunities for completely new products. You can ask if there are any such tasks that your customer would buy as a service if they were made easy to buy and affordable.
Analyze how your industry operates today and research examples of doing things differently and better in another industry. Take unrelated industries, for example, fast food restaurants or car manufacturing, and see how they do certain things.
How to productize
I have been involved in several service productization projects as a consultant or as an entrepreneur. It always starts with defining what exceptional value the service can help the client to achieve, and what make the service stand out.
In a presentation a few years ago I heard Professor Grönroos present his CSS model (Conceptualize, Systematize, ‘Servicize’) for service commercialization. According to my experience the model aptly describes the main phases of the process. Here is the model in essence:
- What outcomes that the customer wants and values do we provide? For instance: speed in delivery, security, low risks, or better ROI than average.
- What is the unique and marketable way that we can do it?
- What processes are needed?
- What resources should be used?
- What customer and back office interactions are needed?
- What are the limits for flexibility and adaptability?
- What support (physical, systems or leadership) is required?
Make sure that each and every resource, process, interaction and customer touch point function in a way that supports customers’ value-in-use, that is, as services.
Information technology and the internet are an essential part of service productization. You can automate parts of the process and customer interaction. In some instances it is possible to offer a totally automated process online.
One very important consideration that should always accompany the CSS model is the financial study, or the business case, of the service. What monetary benefits does the customer get, and how can we guarantee that the service is profitable to us?