​The Strategic Guide on How to Productize Professional Services Firms

Productization in professional services refers to the process of transforming customized, labor-intensive expertise into standardized, scalable, and often tech-enabled offerings. This strategy involves packaging intellectual property into pre-defined tools or programs with fixed pricing and delivery models. By adopting product-minded growth strategies, firms can achieve higher profit margins and improved revenue visibility compared to traditional customized services. Learning how to productize professional services firms is essential for businesses looking to scale beyond manual labor constraints.

Key Takeaways

• Productization transforms customized, labor-intensive professional services into standardized, scalable, and tech-enabled market offerings.
• Firms adopting product-minded growth strategies can achieve significantly higher profit margins than traditional service models.
• Successful productization requires packaging intellectual property into pre-defined tools with fixed pricing and delivery models.
• Automating existing services allows firms to leverage internal expertise while reducing the cost of delivery.
• Identifying urgent and expensive customer problems serves as a foundation for developing high-impact product solutions.

Many professional services firms pursue growth through the following strategies:

• “Productizing” existing services
• Creating more scalable, renewable service offerings
• Building or buying a software platform to extend their service offering
• Creating “FILL IN THE BLANK as a Service”

Product profit margins for these offerings are typically 70%, 80% or even 90%, versus an industry standard of 40% for customized services. Subscription-based products provide superior revenue visibility. This explains why “as-a-service” companies or those with “off-the-shelf” products often have higher valuations than traditional professional services firms.

A productization strategy can be the right solution for your company's growth, but these strategies are not easy.

These strategies require a different set of skills, business processes, and investments. So, if you want to do these well, where should you start?

Defining Productization in Professional Services

In the context of professional services, a “product” is a scalable, tech-enabled tool or program that can be packaged and sold independently of manual labor. Just like a tube of toothpaste that you might buy at a store, a knowledge-based product has a name, a pre-defined set of services and benefits, a pre-defined process for delivering those benefits, and a set price.

Here’s an example from a recent client of ours that’ll show you what I mean.

A consulting firm built a database and data analysis methodology they use as part of their consulting engagements. But, if that data analysis is sold as part of highly customized consulting engagements only, the firm can only grow revenue as fast as it can add and train staff (especially if it wants to maintain the quality of service it is known for in the industry).

The firm realized it could grow its revenue and improve its profit margin by offering that database and data analysis as a “product” for companies to subscribe to and access through a self-service portal.

The firm converted a component of its customized service offering—the database and data analysis methodology—into a product that could be sold in addition to its less scalable, customized services. The firm developed the product using an approach that helped it grow revenue by attracting new customer segments and grow profit margins, while simultaneously not putting its existing consulting services business at risk. That’s the sweet spot.

Two Strategic Approaches to Productizing Services

In the scenario above, the firm's product developed from something it had already established as part of its service offerings. Finding the right product often comes through a process of discovery and scoping to uncover customer needs, see the gaps in the market, and fill them with something your firm already does well. There are two popular approaches:

In Putting Products into Services, Mohanbir Sawhney discusses how some professional services firms develop marketable products by looking for the “…untapped potential to automate the services they are already providing successfully.”

Sawhney provides an example of an analytics company that reviewed medical claims for fraud, waste, and abuse. Years ago, this was done manually through the physical review of claims for duplicate services, miscoding, or other indicators of inappropriate billing. Over time, the company observed patterns in questionable claims. These patterns were robust enough that the company built an algorithm to detect and flag potential fraud, waste, and abuse for further review.

“Tasks that meet two criteria – they’re performed frequently and they require little sophistication – are the low-hanging fruit for productization.”

Worth noting is that that algorithm did not eliminate the human-expertise needed to examine claims thoroughly. Instead, it expedited it thereby allowing the company to significantly increase the number of claims reviewed, reduce the overall cost of the reviewing process, and save even more money for its clients.

Another approach to product development starts with finding “…poorly performed ‘jobs’ in customers’ lives-and then design[ing] products, experiences, and processes around those jobs” as discussed by Clayton Christensen in Jobs to be Done.

We refer to this approach as identifying the customer’s most urgent and expensive problem. Because professional service firms are already good at the customer-connection piece, starting with an urgent and expensive customer problem is a high-impact approach to product development. It worked well with a marketing firm client of ours. In their case, the customer problem, or the "job-to-be-done," was producing high-quality web content. The firm’s customers solved the problem by hiring the marketing firm to write web-copy for substantial website revisions. However, after the website overhaul, the firm’s customers still needed talented writers to maintain the websites, write newsletters, post on social media, etc. but it did not make economic sense to outsource those writing tasks.

The marketing firm realized that their customers could create high-quality web content independently by adopting the firm's internal training curriculum. So, the marketing firm turned the training curriculum they used to teach their team into a scalable product for other companies to buy.

At Vecteris, we developed a methodology for “productizing” services that’s proven successful.

The Vecteris Method for Product Innovation and Strategy

I co-founded Vecteris with a team of former product managers, brand managers, and market researchers to help professional service firms overcome struggles with scalability and innovation. We offer product innovation, strategy and management services ranging from understanding the market landscape to translating market requirements into product requirements to product launch and iteration.

We empower teams to create products that solve real customers' problems. During the development stage, we employ a proprietary, proven approach for helping companies identify, develop, and introduce products. We find products that solve urgent and expensive customer problems while also leveraging our clients' existing business assets and new advancements in technology and analytics.

Future Insights on Productization and Service Cannibalization

This is the first article in a series designed to help professional service firms understand the requirements for developing and managing scalable products. In the next article, I’ll show you how to ensure your new products don’t cannibalize your services. As I mentioned briefly above in the consulting firm example, the ideal, yet tricky, situation is finding a product that expands your reach without eating into your current service offerings. Stay tuned for more!

In the meantime, don’t hesitate to reach out if you want to learn more.

Sawhney, M. S. (2016). Putting products into services. Harvard Business Review, 94(9) 82. read it here)

Christensen, C. M., Hall, T., Dillon, K., & Duncan, D. S. (2016). Know your customers'" jobs to be done." Harvard Business Review, 94(9), 14. (read it here)

Frequently Asked Questions

What is the primary goal when learning how to productize professional services firms?
The primary goal is to transform customized, labor-intensive expertise into standardized, scalable, and tech-enabled offerings. This strategy allows firms to increase profit margins and improve revenue visibility by packaging intellectual property into pre-defined tools or programs that can be sold independently of manual, time-based consulting labor.

Why do productized services achieve higher profit margins than custom services?
Productized services often achieve margins of 70% to 90% because they decouple revenue growth from manual labor requirements. By utilizing technology and standardized delivery models, professional services firms can scale their offerings to more customers without the linear cost increases associated with traditional, highly customized service engagements.

How can firms identify the right products to develop for their clients?
Firms can identify high-impact products by automating existing internal processes or by solving urgent and expensive customer problems. This involves applying methodologies like Jobs to be Done to uncover gaps in the market where a firm’s existing expertise can be packaged into a scalable, self-service format.

Does productization risk cannibalizing existing professional services revenue?
Productization carries a risk of service cannibalization if not managed correctly. However, the ideal approach involves finding products that expand a firm’s market reach and solve specific customer needs without replacing the core, high-value consulting engagements that define the firm’s reputation and existing business model.