Products vs Services

Founder’s Club recap for January 17th meeting…

We had Michael Lewkowitz from Igniter start a wide-ranging discussion around shifting business focus from products to services, or vice-versa. We touched on many topics:

  • A false dichtomy? Received wisdom recommends small businesses focus on seeking either products or services, but not both. But a business may slowly shift, such as monetizing services offered around their products (e.g., a bookstore charging for a meet-the-author or book club), or building a product to support their services work. Whether you sell a product or services, it’s about solving problems experienced by your customers.
  • Does your culture support the shift? I hadn’t considered the importance of cultural fit. Services-related work tends to be more constrained by the client and may be repetitive, whereas product-related work is problem-focused and requires research and experimentation. The people performing services have more visibility than those working on a product. Selling an engagement is very different from selling a product. More established businesses may see problems from perceptions of money-making areas propping up money-losing areas.
  • How do you manage the transition from services to product? “Product looks easy until you try it.” Do you continue to take services work or make a clean break? Does everybody wear multiple hats, or do you split out a separate team? Can you afford to take the hit on revenue to get your product out? Could somebody else develop a product that cuts out your services revenue?

The best part of Founders Club is learning from the experiences of others. We left considering one problem: how can a business best manage shifting from services to product, where the services will be cannibalized by the product (and if not their own product, then by a competitor’s), but where its culture doesn’t support it?