Starting a service company can actually be a better starting point to build a product-based firm. They are relatively easy to start, with lower initial costs. They are flexible and focus on purely generating revenue from the start.
Service can lead to a path in building a product company
Understanding customer needs
You interact with a wide variety of customers while delivering a project. This helps in understanding the needs, choices, preferences, and habits of customers. It helps how a customer thinks about a particular problem.
Relationships
Services help build relationships with customers and establish credibility. Especially in a B2B scenario, it helps in establishing a strong trust. These relationships can be a good base for selling products further.
Networking
To get projects, it is essential to establish new networks and nurture the existing ones. These networks of clients and industry connections can later support product launches or collaborations.
Revenues and cash flows
Typically, one does not focus on a specific niche of industries or technologies strictly while in a service business. This helps in acquiring quick customers and securing good revenues and cash flows.
How to productize a service?
When a solution that has been offered as a service has the potential to scale, it can be productized. Often similar types of industries or similar types of personas may have a similar set of pain points. Hence when a solution that has been developed for a particular customer can be a pain point for a similar type of customer segment. Productizing a service involves turning a service-based offering into a scalable and repeatable product.
Understand the pain point
Assess the pain point behind the solution that you are offering to the client. Go to the root of why your customer is needing the solution and why do many similar customers will need the solution.
Understand the core value
Once the pain point of the customer has been identified, understand the core value proposition that your solution has offered or should be offering. Break down your service into its fundamental components. What are the key features, benefits, and deliverables?
Optimize on the features
Your solution might be offering a large number of features to the client. This is because it has been developed as a custom solution. After you have identified the pain point and the core value proposition of the part you want to productize, identify what are those features that are helping to achieve the value to the customer. Cut down the features that are not required, and add features that may be potentially required to build a scalable and valuable product.
Standardize and scale
Once you have recognized which features are to be present to make the product useful, determine which aspects of the service can be standardized or turned into a template. Define processes and standard operating processes. Ensure the product can be replicated without losing quality. Define clear processes and guidelines.
Pricing
Decide the pricing model and strategy for the product. Determine the tiers of the pricing based on the needs, value propositions, and pricing.
Marketing
Identify the channels to propagate the value proposition of your product. Develop a sales strategy that educates potential customers on how your product solves their problems or fulfills their needs.
Conclusion
To build a product company does not necessarily mean to start a company in that way. Starting a service company and executing a variety of projects in various industries can be a good way to understand the customers and the market and collect good initial revenue. This can be the much-needed fuel to build a product. Rather, building a service company can be a very safe way to establish a product firm.
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