Bite-sized tutorials: How can ‘productization’ help your business grow?
In 2012, Stanford University professor Andrew Ng wanted to share his machine learning lectures with a wider audience at the university and put his lessons online with the help of his colleague, Daphne Koller. As a welcome surprise, more than 100,000 students viewed the course.
Sensing this opportunity, Ng and Koller conceptualized the idea of massive open online courses, now commonly known as MOOCs. This eventually gave birth to the online education platform Coursera, which is currently valued at a billion dollars and has over 60 million users. The idea behind their decision to launch Coursera is simple — if you have a skill that can be valuable to many people, convert it into a scalable, replicable product and share it with your target community. That’s the fundamental notion of ‘productization.’
Productization is not a new phenomenon. For example, when someone has expertise in a discipline and feels others may benefit from that expertise, they package those intangible insights into a tangible book and sell it to others worldwide. Virtual assistants like MyOutDesk and website builders like Wix are examples of productized versions of common tasks and processes that everyone needs. These companies have been able to leverage productization to expand their services across continents and are now among the most valuable companies in the business landscape.
What are the advantages of productization?
First, like any product, productized services are easy to market and share with your potential customers. Your customers don’t have to go through the usual customer-firm communication and negotiation of terms before availing of your services. Expectations from both parties are transparent and predefined. Because of these reduced barriers, you can reach many people with minimal costs and resources. For example, Grammarly, a writing assistance tool, productized its language editing expertise into a digital website and mobile app and has grown to 20 million daily users in 2020.
Second, by having a standardized service offering, your company can focus your resources and efforts on perfecting that service. Positioning and pricing become much easier because of this focus. Focusing on a specific service can help you become the best at what you do and help you increase conversions. For example, consultancies and advertising agencies fail to achieve a gross margin of greater than 40 percent, whereas product companies like Google and Adobe enjoy gross margins of 60 to 90 percent.
Third, once you have a sellable product, you can make them available to the market and allow customers to come to you if they need your service. This reduces your transaction time and lets you speed up your sales. Unlike a service-based company, you are not limited by the number of service providers your firm can afford to hire. For example, tools like ManyRequests allow you to make one-click payments almost instantly.
What are the drawbacks of productization?
Many clients would pay a premium to have a customized service that’s tailored specifically for them. Productization does not allow that. The idea behind a productized service is to create a generic solution that you feel a large audience would need. If you think your solution is better when customized to individual needs, then productization may not be the right approach.
Also, building any product is time-consuming. It requires a hefty initial investment, time, and patience. The subsequent rewards of building a marketable product are huge once it’s ready to be sold to customers. However, until then, be prepared to spend time and resources ideating, prototyping, testing, and launching your product.
Finally, if you have an existing client-base that paid for your services, then they may not be pleased with your firm’s pivot to a productization strategy. Being transparent about your plans and effectively communicating the benefits of productization for your firm as well as them is crucial.
What is the productization process?
Broadly, the following steps are vital to building a great product from an existing service:
The ideation phase allows you to decide the best approach to converting a service into a product. At this step, you must decide which features to standardize and which aspects to customize for each user.
After that, conduct thorough market research using surveys, focus groups, and customer analytics. This will help you understand your customers’ needs and wants, and lets you learn about different customer segments, their price elasticities, and alternative products and services in the market.
The next step is to build quick, cheap, and functional prototypes using the technologies and tools available. This provides initial estimates of the production time and the cost of your final product and will allow you to conduct a feasibility analysis.
Testing is one of the most important steps because it’s the best approach to scientifically assess a particular prototype’s potential. Evidence-based practices should be applied to all business decisions, and conducting robust A/B tests is an application of that thought process.
Finally, after selecting the best prototype for your customers, develop and launch the product. At this stage, focus on effective marketing communication and after-sale services and support.
Concluding thoughts
Productization is an emerging business term that has been gaining traction in recent years. Still, the fundamental principles behind it have been applied for many decades by industrialists, authors, and entrepreneurs. Your firm may be ready to productize your service or process — and now you know where to start.
