227: Productize Your Services with Eisha Armstrong

24
Jul

Eisha Armstrong, Executive Chairman and Co-Founder of Vecteris, is motivated by making a difference and fostering an inclusive, balanced work environment. Her focus is to productize your services to drive success.

We discuss her journey in co-founding Vecteris, a consulting firm helping B2B services organizations productize their offerings. Eisha shares her insights on scaling businesses through technology, standardization, and addressing urgent customer problems. Her framework includes productizing services, bundling additional services, and developing SaaS products. She emphasizes the importance of innovation and leveraging generative AI to improve service delivery. 

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Listen to the podcast here

 

Productize Your Services with Eisha Armstrong

Good day, dear listeners. Steve Preda here with the Management Blueprint Podcast, and my guest today is Eisha Tierney Armstrong, the Executive Chairman and Co-Founder of Vecteris, a consulting firm that supports B2B services organizations to successfully productize their offerings. Eisha, welcome to the show.

Thank you, Steve. I’m so happy to be here.

It’s a fascinating subject, productization. I’ve been kind of studying it and pondering it for years of how to do it and how not to do it. And I think I did a lot of bad trials as well. But before we go there, I’d like to ask you, what is your personal Why?

That’s a great question. And it’s one that my co-founder and I gave a lot of thought to when we were founding our business. It’ll be six years ago this summer. So, personally, both my co-founder and I are very interested and value making a difference in the world, leaving the world a better place than what we found it. And so, when we launched the business six years ago, we had in mind two things. The first was we wanted to create a work environment where professionals could have a fulfilling professional career, but also be able to balance work and life. And we wanted to make sure that we were creating a very inclusive work environment because unfortunately, both of us had had some negative experiences in our career prior to that. And so, we’re trying to create a much more ideal working environment, at least for us. And then we wanted to support businesses that were trying to create services, offerings, products that would hopefully make an impact in the world. And so, that is one of the screening mechanisms that we use when we’re talking to clients is tell us more about the impact that you’re hoping this makes in the world, not just on your balance sheet or profit statement, but what’s kind of what’s their bigger why? So I really appreciated that you started with that question.

So, what is Vecteris doing to make life better for people?

So, we specifically focus on helping leaders at professional services firms. So, that could be consulting firms, accounting firms, law firms, marketing agencies, anyone who’s typically trading time for money, we help those leaders figure out how to scale their businesses using technology. It’s what we call productization. And that could be by using standardization and technology to just improve the way they deliver services to clients, make it more efficient. But most of the companies that we’re working with, they actually wanna create more productized offerings for their clients. So, that could be a more standardized set of services, but it could also be a product, like a software product, or a data as a service product, or a training product, or something like that. And so, we help them figure out how to do that, because it’s not easy, as you mentioned, there are a lot of mistakes that you can make. And so we help them figure out how to do that.

Why is it even important to productize services?

Great question. So, there are a number of different reasons why a leader might want to do that. So, the first one is, they’re having a hard time growing their business without adding additional people. And if they’re in a tight labor market or a place where it’s hard to find additional professionals, this can help them grow without having to add headcount at the same rate. And when you do that, you usually also then improve your margins. So, it’s more profitable longer term if your services are delivered in a more productized fashion. The gross margins of that are typically significantly better. If you’re creating a product that, for example, is sold as a subscription, then you get into recurring revenue and more revenue visibility. And that can just make your life a lot easier as a business leader. Share on X So, you have a sense of what your revenue is going to be longer term. And if you are thinking about at some point exiting your business, it will make your business more valuable if more of your revenue is recurring and if your gross margins are better. So, that could be another reason. We’re also seeing with generative AI an urgency for leaders, especially leaders at professional services firms, to kind of reimagine how they deliver their services. And are they appropriately keeping up with advancements in technology and uses of generative AI, both to deliver their existing services more efficiently, but also to think about how can they then use either freed up capacity that their professionals now have, or better information, access to information to solve new customer problems. We see generative AI as both perhaps a competitive threat, but also a real growth opportunity for professional services firms leaders if they think smartly about it.

What about the customer? Are there benefits to the customer in the productized services?

Absolutely. So, one of the big benefits is you get more assurance of quality of delivery. So, if something is standardized and tech enabled, it’s easier to make sure that the quality is similar from customer to customer. Another benefit is that you may be able to offer to solve the same customer problem, but in a less expensive way. So, if you’re using technology, if you’re using something that’s standardized, yes, there may be some customers that still need a more bespoke customized solution to solve their problem. But there may be a lot of customers who don’t need a customized solution. And kind of a more productized approach is sufficient for them and they can solve their problem at a lower price point.

So, it essentially increases access to a certain service that people would not be able to otherwise buy.

Exactly.

That’s interesting. I mean, I think about the SaaS products that, you know, in the past I had to have buy an expensive integration and buy the software license and then buy the hardware and go through the pace of implementing a software now, I can just try it, pay as I go, get a free trial or pay for a few months, and if it works, great. If not, okay. Got it. So, what is the spectrum of productization? So, is it just the one thing, or there are different levels of productizing a business?

Yeah, yeah, so you’re right, it’s a spectrum. It’s not one thing. So, sometimes when I’m talking to a leader about this, they assume I’m suggesting that they become a SaaS company. And certainly, we do have clients who that may be something that they want to do. But most often the very first step is just productizing your existing services. Share on X So, using technology to more efficiently deliver them, perhaps standardizing those services, creating packages so that they can be delivered more effectively to your customers. And that may not be a difference in how the customer experiences it. They may still get most of the value in talking to a professional. There may be still a lot of things that feel customized, but the work that the professional is doing may be more standardized and tech enabled. And so that allows it to be delivered more efficiently and effectively. So, that’s the kind of the very first version. It’s where a lot of companies start. It’s just that productization of their existing services. And then the second is creating products that are designed to be sold or delivered alongside your services. So, for example, let’s say you’re a company that creates economic models for large package goods companies, and you’re helping them create more effective forecasts. So, in the past, you probably did that with hiring an army of economists who would build these very complex econometric models and getting access to all this data around commodity prices and customer demand and things like that. And you create these beautiful models for these companies to use. Now, you have technology that can, once the model is created, perhaps maintain it and continue to update it. And if the business is not that sophisticated, maybe they can use a prepackaged model. So, creating a product, let’s say a software product, to be maybe a maintenance product alongside your custom services of building those upfront models, could be a form of creating a product that again, is bundled with services. A lot of different examples of that. That’s a great way to do what we call more solution selling, where you’re selling both custom services as well as products, perhaps bundled as one solution or kind of presented to customers as different Lego bricks that they can mix and match. Then the final version would be creating a standalone products business. There might be a lot of reasons why an organization might want to do that. Perhaps they are targeting a new market segment. So, if they’ve identified that they can tech enable what they’ve done and perhaps create a piece of software that can do it for organizations, they might decide to build that and then sell it to a more price sensitive segment of the market, for example. Or because the economics of a business like that are different, they may decide to spin it off and have it be a separate business with some type of, you know, partnership agreement in selling services alongside the product. So, that’s another reason why they might create a standalone products business.

Yeah, that’s interesting. So, the first step is just to productize, to standardize the delivery of your service, maybe use some tech to make it more efficient to deliver, make it more uniform, effectively less customized, and maybe more the quality could improve because the process can be more refined. Then you bundle other services. I’m just thinking of my own coaching business that, you know, I’m bundling the catering of the sessions, I’m giving them a digital portal, I do some calls. So that essentially makes the delivery more complex. And then the last one is to develop a product business that is basically the whole value is being delivered by technology, right? Is this what a product business is?

Exactly, yeah.

So, you minimize human interaction, essentially you make it infinitely scalable that way. So, what are some of the pitfalls that people face when they want to go through these phases? What is the biggest pitfall from going, it’s just a service like a consulting firm and going to productize, what prevents them to do that? And then when they manage to do that, what are the challenges of bundling and then turning themselves into maybe a SaaS business?

Yeah, so this is an area where we’ve done a lot of research and we’ve tried to document what we call the seven deadly mistakes, or seven deadly sins of productization, because we kept seeing the same mistakes made over and over and over again. So, we tried to document those, give them catchy names so people could remember them, and then also just educate leaders on how they might avoid those mistakes. One of the first ones, and I think to your point around what are some of the biggest ones, is this idea of starting too big. Share on X We’ll talk to a lot of leaders and they have this idea of they’re going to create a software business, let’s say. It’s like, okay, that’s great. Let’s think about how we can iterate to that point. Rather than going from custom services all the way to, I’m going to become a SaaS business, what are some incremental things? How can we go up that ladder, run by run, and test the idea before you start writing seven, eight figure checks to a custom dev shop to build a piece of software? So, this is not something we came up with, but this idea of lean product management, you know, agile thinking, they teach it in design thinking as well, kind of testing and learning, testing and learning over and over again, is a very big principle to keep in mind and a way to avoid that mistake of kind of investing too much money, starting too big, and then losing your shirt because you didn’t know what you were doing, or you didn’t have like as good of an idea as you thought you did. And that leads me to the second big one that we see, and that is developing a product that does not solve an urgent and expensive customer problem. And then I would amend that by saying developing a product that doesn’t solve an urgent and expensive problem for an attractive market segment. So, this is where you get into real kind of commercial thinking about what is the customer problem that you’re trying to solve? Is it a problem that they’re willing to spend money on this year to solve that makes it urgent and expensive? And is this a customer segment that you can reach that is large enough to make some decent money off of that would warrant the investment. So, that is another one because this is an area, Steve, and I’m sure you’ve seen this in your own coaching business, where perhaps you have one client come to you and say, wouldn’t it be great if you could do blah, blah, blah. It’s like, oh, okay, this is a new product idea. Well, one client requested it. One client is not an attractive market segment. You have to go out and see if there are other clients who also want this that would be attractive to sell to and would they be willing to pay for it? Or what I see is leaders who say, oh, we have this great piece of intellectual property. Let’s turn it into a product. But they can’t articulate what customer problem does this solve. And so, then they run down this path and they develop a product that nobody wants. Or it's a nice to have, but it's not a need to have. Share on X They’re not willing to pay money again to solve that problem. So, that’s another one of the big seven that we focus on a lot.

Yeah, I love it. Yes, it’s easy to fall in love with our own ideas and there may not be a market for it. Sometimes, people have this intuitive sense of falling in love with their own idea, which there is a market for, like Steve Jobs with the iPod and the iPhone. But they are not all Steve Jobs.

No. He was very brave. You bring up another one, if you don’t mind me mentioning this, this fear of cannibalization. Because when Steve Jobs launched the iPhone, he cannibalized the iPod business that Apple had, right? Nobody has an iPod anymore because you have all your music on your phone. But he knew where the market was going. And he was willing to take that risk and cannibalize their own stream of revenue, rather than being disrupted by Samsung or Nokia or somebody else creating a smartphone. And that fear of cannibalization, I see hold a lot of leaders back and they don’t fully invest in the marketing and sales that would be needed then to really successfully launch a product that perhaps could cannibalize their services revenue.

Yeah, that’s what possibly killed Nokia actually, that they didn’t innovate. So, what’s that tipping point where or how do you face yourself? So, let’s say you have a thriving services business, you’re seeing around corners, AI and everything, it’s going to be disrupted, you develop your product as service. How do you know that it’s a good time to develop maybe a SaaS solution, or how much of your resources should you be investing in it? You know, is there like a rule of thumb which you see working for companies to make these kind of decisions?

Yeah, so, in this environment right now with generative AI, I recommend kind of a two-prong approach. So, the first one is what I call distributed innovation. And this is where you have everyone in the organization. Hopefully, you have made the investment at this point for Microsoft Copilot or GPT-4 or something like that. If you haven’t, please go do that today. And you have everyone in your organization experimenting with how they can use generative AI and all of these new tools that are coming out every day to be more efficient in the work that they’re doing, that’s the first one, and solve new customer problems. So, problems you couldn’t previously solve because you didn’t have the time or the information. And that is something that you want everyone in the organization doing, because it’s a lot cheaper and faster for an individual to innovate on their own work than it is for you to do the second part of the two-prong approach, which is create like a corporate innovation arm that is doing exploration for new product ideas, which you also do need. And it has to be dedicated resources. It can’t be people doing it off the side of the desk. But job one in this environment is that you have distributed innovation and then you have people sharing, hopefully on a weekly basis, their use cases for how they’re using AI in their work, and then you’re deciding which ones do you want to then codify and standardize as part of your regular way of doing business. There are the two prongs. First one, distributed innovation, all your professionals innovating on how to do their work on a day-to-day basis, sharing that, collaborating it, deciding which ones get codified, and part of your new way of doing business. Then the second one is you’ve got some type of funded corporate innovation capability that is out there looking at new product ideas. And it could be new services that are delivered more scalably. It could be these kind of bundled solutions with products and services, and maybe you’re partnering with a product provider. You don’t have to build these products yourself to offer those bundled solutions, or perhaps you’re investing in building something from scratch. But they’re looking at a portfolio of ideas. They’re prioritizing those, and then they’re testing and learning. And that is one that is important because that’s where you get kind of more breakthrough innovation, but it is more expensive because it requires you to experiment, which requires failure. And failure can be expensive. So that is another, I think, key part. And again, especially in today’s environment where we’re really on this experience in this massive shift in how we use technology and knowledge work, that we’ve got somebody dedicated, at least one person dedicated in our organization to thinking about what are some of the more disruptive ideas.

Yeah. I guess this is one of those questions that there’s no easy answer to it because it goes to the core of entrepreneurial activities. You know what to put energy behind and what is going to work, what is not going to work and who is going to do it. Okay, but I love this idea that the distributed duration had everyone work on ChatGPT. I recently had a podcast guest who talked about, basically, he created a culture in his company that skills don’t matter anymore, it’s about how you can use AI. And you don’t have to use AI. He claims he improved productivity by 20x since the pandemic in his business. It’s a big claim, but definitely it’s a thing to do. So, we are getting close to our time here. Before I ask the final question, I have a penultimate question, which is what is it that you’re working on that most excites you, Eisha?

Yeah, so I’m working on a new book. I have a new book coming out later this year, and it’s all about the go-to-market or commercialization process for new products, specifically when you’re a services business and perhaps you haven’t gone to market with products before because it’s a very different marketing and selling motion when you’re marketing and selling products than when you’re marketing and selling services. So that’s what I’m most excited about right now.

Oh, that’s very exciting. Can you share the title or that’s still in the works?

We are still A-B testing the title. Again, test and learn, right? So, we try to drink our own champagne.

Yes, good, good stuff. Well, I’m definitely going to follow you on Amazon to make sure. I probably am already following you because I got your previous book, which is Productize and then you have a new one. Remind me of the title.

It’s called Fearless and it’s all about the culture change that’s needed when you do this.

Yeah. Don’t fear disruption, be the disruptor kind of thing.

Exactly.

Yeah. I love that idea. Okay. So, if you’re in a service business, especially professional services, it’s a must. You’re going to be disrupted, you have to be the disruptor. Go forth and productize and bundle and then possibly turn yourself into a SaaS business as soon as you can, but at the minimum, use AI for everything that you can. So, if people would like to follow your advice and learn more, read your books, connect with you, where should they go?

So, LinkedIn definitely is where I recommend people go. I love getting LinkedIn requests. Just put that you heard me on this podcast.

Okay, well, definitely go out and connect with Eisha Tierney Armstrong, the Executive Chairman and Co-Founder of Vecteris. Thank you for coming to the show and telling us and sharing with us the secrets of productizing services. And this is a huge opportunity for professional service firms to scale, to get higher gross profits and to be a successful innovator in their sector. So, thanks for coming and sharing. And those of you listening, as you can see, the quality of our guests is going through the roof, and you cannot miss these episodes. So, make sure you follow us on YouTube and subscribe and follow us on LinkedIn as well for new episodes. Thank you, Eisha, for coming on the show.

Oh, thank you, Steve. It’s been a pleasure.

Yeah, it was a fun episode. Thank you.

You’re welcome.

 

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