Adding a software product to your list of client offerings introduces a lot of exciting possibilities to help your professional services firm grow. However, without a well thought out product plan, this project can go sideways quickly. Remember greater than 9 out of 10 software products fail. I’m here to provide everything you need to make sure this doesn’t happen to you.
We want to make sure you manage this process correctly. The biggest mistake you can make at this point would be to try and complete the necessary steps in the wrong order. For example, if you build your product before you’ve validated your value proposition then you will have made an expensive and time consuming mistake that could doom the whole project.
So let’s talk about why having a well designed product plan is so important and the steps you need to follow to create one properly.
We’ve already talked about the incredibly high failure rate for product businesses. This should provide you with all the warning you need to pay close attention to this advice. Afterall, I have personal experience with having failed in product myself. I don’t want you to have to make the same mistakes. So let’s talk about what you need to do instead to avoid this situation.
The first step in the process is to build your product plan. You need to write down answers to at least the following questions to have the beginning of your plan hammered out.
- What problem is your software product going to solve?
- Who experiences the problem you are planning to solve?
- How are you planning to solve this problem with your product?
- How is this product going to be positioned around your existing list of services?
- What are you going to charge for access to your product?
There are many more, but these are the key foundational elements to get you started. Throughout the rest of this article we’re going to help you answer these questions.
Before I talk about what we’re looking for, I need to first talk to you about how you are going to find it. That answer is what I refer to as discovery with your clients to identify what I refer to as problems worth solving. This is a process whereby you interview prospective or existing clients to better understand their challenges. Once you are better able to understand their challenges, you can move on to the next step in the process of solution design.
All of the steps to successfully launch a product are laid out in greater detail on our website and across several other articles. You can find links to those in the list below for reference. These articles have been written with mission driven organizations in mind, but the concepts are the same for you.
- Step 1 – Discovering Problems Worth Solving
- Step 2 – Validating Your Solution Design
- Step 3 – Successfully Managing the Build Phase
Now that you have more background knowledge into the process, let’s talk more about building your product plan.
Discover the Opportunities
The best place to look for the data that will help you build a great product plan is to first speak with your own team. Your team is regularly interacting with your clients as part of their responsibilities managing service delivery. Unbeknownst to them, they have incredibly valuable insights as to where what I call the problem patterns exist for your clients.
Tip: Problem patterns are exactly what they sound like. These are patterns of problems or challenges consistently experienced by your clients. This is an excellent place to start when thinking about the value proposition for your future product.
Measure Your Costs
You’re looking for problems and challenges that are experienced by your clients on a regular basis. Once you’ve discovered that list, you’ll want to take a closer look at how you are solving these problems today. Measure how much time and effort is going into solving these problems for your clients. How many members of your team are required to solve these problems? Which team members are involved? You’re going to want to add up all of these numbers to get a better idea as to how much it is currently costing you to solve these critical problems for your clients.
Prioritize the List
After you have all of this data, you need to prioritize the list to get a better idea of where you should start when it comes to designing the value proposition for your future product. The more frequently your clients are experiencing these problems and the more expensive they are for you to solve means those problems should be at the top of your list of problems worth solving.
The Benefit to Your Organization
The added benefit your firm will receive for investing in building this solution as a product is that it will make your firm more operationally efficient. That means lower costs, higher profit margins and a solution that scales better than your existing services.
Sound good so far? Let’s double down and talk more about the Return on Investment (ROI) you’ll see from making a successful investment in product.
New Revenue Stream
If you are successful with discovery, design and ultimately the build phase of bringing your product to market, you are set to provide a lot of value for your clients. Providing this value to your clients means you’ll now have a major opportunity to create a new revenue stream for your professional services firm. Only this time, the solution will scale efficiently and effectively. This means higher margins due to lower costs through a simpler solution delivery process.
As we reviewed in the previous section, a key advantage you have as a professional service provider is that you already have access to your internal team and clients to get the discovery data you need to influence critical decisions in the process. We’ll also be leveraging these relationships to design a pilot for your future product. This is a dedicated phase of early access provided to your product for key clients that need the solution.
A successful pilot phase is critical to truly validate the product experience you’ve designed for your clients. Assuming the pilot goes well, you will also have an opportunity to capture what I refer to as social proof. Social proof is an example of how your product has been able to solve a specific client problem. Written in story format, or a case study, social proof is incredibly powerful for connecting dots for visitors on your website who are thinking about purchasing your product. Seeing how your product has helped others makes it easier for prospects to better understand what your product can do for them.
We’re going to talk more about designing pricing for your product later in this article, but before we get to that, I want to talk more about other revenue-generating opportunities you may wish to explore.
White Labeling Your Product
Professional service providers have unique advantages over everyone else that’s looking to be successful in product. Having a track record of successfully selling services and access to a list of clients makes achieving success in product much easier. Additionally, there is another advantage that we haven’t talked about yet that you may wish to explore as well – white labeling your future product.
Tip: White labeling means to allow your customers to resell your product under their own brand.
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You see, one of the biggest reasons why building a product in this way typically experiences a higher success rate is because you already have access to some of the data we need. You just need to know how to access it and what to do with it. Additionally, you know your clients and industry quite well because you’ve probably been in it for years. However, one thing you may not know is that other firms like yours are either searching for the solution you just built or can easily be convinced that they need it.
This provides an opportunity to extend the reach of your product by building out a partner network. This would mean tapping into a greater distribution network to reach clients at a greater level of scale. Now, the thought of offering value to your competitors’ clients may scare you a tiny bit, but I promise once you see the amount of revenue you are capable of generating that worry will likely fade away rather quickly. Wouldn’t you rather be the provider of the solution so you can capture this value instead of waiting for them to build a solution of their own?
The bottom line is, professional services firms like yours are experiencing similar challenges. As such, if you build a solution for your firm, you can sell that solution to other firms like yours as well.
Next, let’s talk about how to successfully design your product around your services.
DON’T Cannibalize Your Services
A unique element of your product plan will be to ensure that your product is designed to complement your services NOT cannibalize them. We want to maintain (and grow) the success of your professional services as well so it’s important we think about how your product will fit into this picture without causing any type of negative impact to your business.
The best way to do this is to have as clear and distinct criteria as possible to make it easy for your client to understand which solution is ideal for them. For example, your services should be well suited for more complex situations that require a more customized approach. Your product, on the other hand, is designed to address a specific challenge comprehensively and efficiently. Typically speaking, your services are also set at a higher price point than your product. This adds additional distinction making it even easier to differentiate between the two.
Tip: It’s critical to get this right. If you don’t draw clear lines around your services and product it will confuse your client. You don’t want a situation where they wind up with the wrong solution because they were confused or worse don’t buy anything at all because they couldn’t figure it out.
Now that we’ve gotten that out of the way, let’s talk about the exciting possibilities.
Positioning Your Product
We want to make the use cases for your services and your product crystal clear for your clients. To successfully design the optimal positioning for your services and product you must know exactly why and when your client will buy each. This will help you with everything from what I call copy to conversations.
Tip: The phrase I use copy to conversations, is a reference to everything we write (copy) to successfully market your product and services to conversations or everything we say when communicating the value proposition of each to your clients.
If you get the positioning correct, you will experience a rather powerful benefit of investing in product – your services will help sell your product and your product will help sell your services. At NxtStep, I’ve been involved with designing this mutually beneficial relationship between services and products countless times for numerous professional services organizations. When done properly, it is a thing of beauty. You will experience growth like never before.
There is an appropriate time and place for your client to need your service, your product and sometimes perhaps both. The great news is now you have something for everyone. This means that no longer will you need to simply say goodbye or ‘not yet’ to prospects interested in your services because they can’t afford them (yet). Chances are those prospects need your product and can afford it now. That means an instant revenue boost for your business.
The goal here is to strike a well positioned balance between your services and product to enable growth and a mutually beneficial relationship.
Pricing Your Product
Another key element of your product plan will be how you design pricing for your product. Previously, I talked about running a pilot with early stage clients to validate your product’s value proposition. I also mentioned that successful pilots generate great case studies to share the wins experienced by your clients with the world to make it easier for future prospects to connect the dots. Something I haven’t mentioned yet, is that running these pilots also gives you the opportunity to validate and test a pricing model for your product.
Beyond simply setting early pricing and charging your pilot clients for access, you must also focus on capturing data to tell the pricing and ROI story for future prospects interested in your product. This process looks like you measuring the value your clients received from what your product solved for them. How much time did it save? Did it help them reduce costs, generate revenue? These are the type of questions you must ask to build what I refer to as the ROI equation. Armed with an ROI equation, you can get a better understanding for how well your product is currently priced to make sure you aren’t leaving money on the table.
NxtSteps from Here
To get started with this process, you must first focus on discovery. That’s where the data you need lives. Again, your goal should be to identify the top problems worth solving for your clients. This will be the foundation of the value proposition for your product. Your product will provide the solution to this problem that scales more efficiently than your current list of services.
The value you’ll receive from making this investment is that eventually you’ll have a product that has essentially automated a solution to a critical problem experienced by your clients. Since you built this solution in the form of a product you can provide it to a significantly larger group of clients that will cost you much less to operate and has the potential to generate tremendous revenue to compliment your services and help your organization grow much faster.
If you don’t have a product officer to help you set the strategy for this project, you will likely need one. I can help you avoid costly mistakes and accelerate your progress towards growth.
My fractional product officer service gives you all the advice and strategy you’ll need at a fraction of the cost of hiring someone for this role full-time.
If you’d like to learn more about my fractional product officer services, book time to speak with me so I can answer your product related questions.