Until recently, I worked for one of the leading professional services firms in the world. The organisation had fantastic depth of human talent. And an unrivalled client base amongst the leading companies across the globe. We all made a ton of money.
Yet as leaders we could never escape the feeling that something was missing. Every client engagement was different. A team of smart people would think through a complex business problem and use their experience and a bit of innovation to develop a specific solution.
If only, we could capture the essentials and repeat the same solution over and over. What a business model that would make!
Alchemy - Turning service gold into product margin
For years we struggled to turn gold plated, world leading services into products. Every leader was adamant this was the way forward. I well remember one senior partner literally thumping the table in a 3 Michelin Star London restaurant. Barking “Repeatable solutions” at us in his most stentorian tone.
The SaaS struggle to dismantle every product
Contrast this with the startup world today. SaaS is the business model of choice for software.
By definition, it takes a product (software) and turns it into a service. And technology enables this mindset to spread far wider than just software. As one of the leading thinkers in the industry, Ben Thompson of Stratechery, put it recently, we are now in a world of “everything as a service.”
It looks like the leaders in services are desperate to become product businesses. While those who make a living from products are striving just as hard to turn those into services.
What is going on here? No doubt part of the answer is “grass is always greener” mentality. On a more positive angle, both attitudes show a bit of an innovation mindset which can only be a good thing for customers. But in the end, I don’t think we will see an outright exchange of business models. Services will win.
As customer we love to be treated to excellent service. Delivering services is more painful for most people. As technology overcomes that particular barrier, expect to see a service mentality take over (almost) everywhere.
If you are building a product or running a product company, remember selling and delivering services needs a different approach to success.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.