8 Triggers for Productization
As markets evolve and industries face new challenges, many firms find themselves at a crossroads, contemplating the shift toward productization. Productization can significantly enhance valuation, streamline operations, and boost competitiveness. But what triggers a professional services firm to productize? Let’s explore the eight most common reasons that move B2B services organizations from traditional service models to a more productized approach.
Download tools that help you put the insights from this blog into action.
The rise of digital-first alternatives and the aggressive buying of market share of venture-backed startups, especially noted pre-2023, have forced many traditional B2B services firms to reconsider their business models. Companies are increasingly adopting productization as a strategy to fend off competition from these new entrants who often come with innovative, scalable product solutions that challenge conventional service models.
As more use cases for GenAI emerge within professional services, firms are motivated to productize their offerings incorporating AI functionalities.
In times of a tight labor market or an aging workforce, B2B services firms may turn to productization as a strategy to manage growth without proportionally increasing headcount. This approach allows firms to maintain or expand their service offerings by leveraging technology and products that require less human intervention.
Interestingly, some company leaders pursue productization simply because they seek new challenges. These founders or senior executives might feel they have reached a plateau and see productization as a stimulating strategy that can bring a new dimension to their business, driving innovation and reigniting their entrepreneurial spirit. For example, we recently talked with two founders of a construction company. Approaching the end of their careers they were looking to launch a tech product based on problems that they saw in their own day-to-day work--this would be their legacy. They started by building their internal product with goals of testing it in the market in the coming months.
For firms whose services have become commoditized, productization offers a way to differentiate themselves from traditional competitors. By developing unique solutions, they can add distinctive value that is not easily replicated, for example, the digital marketing space has become very crowded, and by productizing organizations can scale their business, provide better value for money, and differentiate themselves.
Changes in customer needs and buying behaviors often drive the shift toward productization. Services buyers are less likely to select service providers solely based on relationships; instead, they look for partners who can offer comprehensive, product-oriented solutions that promise ongoing value.
A common trigger for pursuing productization is the founder's desire to exit the business. Productization can make a company more attractive to potential buyers or increase its valuation during a sale. For example, productized business often has more recurring revenue streams and scale.
When growth equity investors invest in a firm, productization often becomes part of their investment thesis. These investors are looking to maximize their returns through scalable, efficient business models. They see productization as a way to standardize offerings and tap into new markets, thus driving growth more systematically and increasing the firm’s market share.
Recognizing the triggers for productization is crucial for any firm considering this strategic transition. Whether driven by the desire for a higher valuation at exit, investor influence, market pressures, or internal motivations, understanding these catalysts can help leaders make informed decisions that align with their long-term business goals. As the business landscape continues to evolve, the move towards productized solutions appears not only strategic, but necessary, for those looking to stay competitive and relevant in their industries.
If you are considering productized solutions to stay competitive and relevant, check out Productize 101, led by Vecteris Productization Coach, Jaime Drennan. You will learn:
- What does it mean to ‘Productize’?
- 7 Common Productization Mistakes
- How to Overcome Fears of Productization
- The Vecteris Productization Pathway®
Recommended Resources:
- Download tools that enable you to take action on these concepts at vecteris.com/productize-book-tools