Productizing Solutions: Cracking the Code to Profitability
In some ways, the concept of "productizing solutions" is an oxymoron. Many feel that, by definition, solutions require considerable customization when they are delivered to a customer. If it's too productized...well, then, it's not really a solution -- it's a commoditized offering that doesn't really address the business issues that a specific customer faces.
Let's make sure we're all looking through the same lens when we talk about a solution:
"A solution is a combination of products, services, and intellectual capital, focused on a particular customer problem which drives measureable business results".
This is a definition that came out of literally 2 years of discussion and debate among senior solutions professionals at 25 leading technology companies over a 2-year period at ITSMA, which is the leading services and solutions marketing association for tech companies.
There is more than a grain of truth expressed in the sentiments that a solution can't be productized. However...we respectfully disagree. Nearly all technology-based companies can and should have a significant portion of the content for every solution productized. The elements of an offer that can be productized include processes, tools, technologies, methodologies, etc. Call it what you will -- standardized, replicated, packaged, productized -- they all describe the same process of taking the variability out of creating and ultimately delivering solutions. It stands to reason that the lower the variability, the higher the probability of implementation success, leading to higher margins and higher customer satisfaction.
We believe that companies should strive to be on the right side of the Solutions Matrix (shown below) where repeatability should drive consistency, leading to higher quality standards, more reliable KPI's, and ultimately greater sales at higher margins.
Let's assume that you agree that productizing solutions is something a company should strive to do. On the surface, at least, the benefits certainly seem to be there for those who are successful. So where do you start? How do you go about turning complex solutions into product-like offerings? The first step is to get a sense of the portion of your solution(s) that you think can be productized. The entire range, of course, stretches from 0-100%. We refer to this as the Solutions Productization Continuum. At the lowest point of what we call Blue Sky Creation (0% reusable components or other inputs), everything is considered a beta, with all of the applicable methodologies and systems that comprise the new offering being built from scratch. In general, we tend to find systems integrators to be the closest to this end of the spectrum -- Northrop Grumman IS, Accenture, Raytheon, CSC, etc. At the most standardized region of the spectrum which we refer to as Factory Produced (100% reusable components and other inputs), nearly all of the solutions components have been used, proven successful, and are available to "cut and paste" into new offerings. While we don't konw anyone who is at the 100% productized level -- which would likely indicate that the offering isn't in fact a real solution -- companies such as Polycom, Lenovo, and even parts of Hewlet-Packard and IBM come close. We know, for example, that IBM has succeeded in applying SKU numbers to some of the highly replicable solutions.
Of course, it is unlikely that any company will have a true solution that is completely a Blue Sky Creation or would be considered Factory Produced. Most solutions are based upon previous customer experiences and contain elements of value that the vendor feels can be reproduced for other customers. However, in order for the solution to have direct business value to a specific customer, it almost always needs some alteration or renovation that takes in consideration the unique business model and/or performance of that specific customer.
The key question is, then, what is the optimum point on the Solutions Productization Continuum? To answer this question, you need to first decide upon the goal of your overall solutions business. What portion of your total business do you want to be based upon your solutions? Can you make the changes organizationally, culturally, and operationally? What are the financial and operational indicators that will determine whether your solutions business is successful or not? What is the "tipping point", after which the marginal investment in increased productization will result in a negative financial return?
The answer, of course, is...it depends! Some of the defining factors that will shape your productization strategy include:
- Are you primarily a product company or a service company? What is your service-product mix?
- What is the level of complexity of your core solutions?
- What components of your solutions are the most costly as variable components, and can they standardized?
- If you standardize certain solutions components, will that change the perception to your customers so much that the offering will be considered a generic version that isn't seen as adapted to their technology environment or business operations?
Remember -- solutions productization is in general a very good thing to invest in. Before you embark on an initiative to drive high standardization into your core offerings, however, be very clear that it's both strategically aligned with your own business model and it be be done in a way that provides you with a measureable financial return.
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Reader Comments (2)
There is more than a grain of truth expressed in the sentiments that a solution can't be productized.
One day in near future we may not need to debate on productization vs. customization especially considering the fast paced growth of technology. Think of genetic-based medicine, artificial intelligence, things are moving more towards personalized experience. We don't need to go that far, facebook even as a product, for instance, manifest a complete personal experience. From casual personal conversation to Arab uprising, it gives flexibility and a solution for human expression which may not even be considered at the time of product definition. There could be numerous unknown ways of exploiting the power of facebook we may not even think about. Ultimately the technology will evolve to such a level where the balance of productization and customization vs. business goals will no longer be considered an issue.