Finding the right product opportunity for your professional services firm

by Sean Boyce

If you’re a key member of a company that offers professional services and you’d like to be successful in product, I’d recommend that you consider two key paths.  The first is to build a solution that will immediately benefit your professional services organization.  The second is intended to compliment the services you currently offer and provide additional value to your clients.

Depending on your choice, the approach you will need to take is quite different, but the process is the same.  In this article, I’m going to evaluate each strategy and provide you with some decision making criteria so you can determine which strategy makes the most sense for your professional services firm.

Background

If you choose to solve your own problem, then you will ultimately be bringing a solution to market for people like you.  That is, other professional services firms primarily in your vertical.  So if, for example, you are involved with running a financial services firm then the solution you build is intended to sell into other companies that offer financial services.

If, however, you choose to solve problems for your clients, then you will still be selling to a similar target market client.  Additionally, the solution you bring to market in the form of a product may enable you to expand into new markets, but more on that later.

What I wanted to do in this section is prepare you for where you are going.  You don’t need to decide now, but I do want you to know what to expect when you get there.  Either strategy will set your organization up for success in different ways.

Let’s talk about the first option in greater detail.

Solving Your Own Problems (Strategy A)

The first product strategy I’d like you to consider is building a software solution for a big problem that your professional services firm is currently experiencing.  This strategy tasks you with a mission to search for and find the biggest and most expensive problem you are experiencing as an organization then build a software product to solve it significantly better than you currently are today.  The goal is to wind up with a software solution to your big and expensive problem that is both more effective and more efficient.  Essentially, your product will be eliminating the biggest bottleneck impacting progress at your firm.

As such, the solving your own problem strategy is intended to be a primary, major improvement to the operational efficiency of your organization.  There are two ways to boost the profitability for your professional services firm and those are to increase revenue or decrease expenses.  This strategy is expected to immediately impact the latter then open up opportunities to improve the former.

There are a number of advantages to this strategy, but we’ll get into that in greater detail in a following section.  For now, what I want to mention is that you will also have the opportunity to generate new revenue with this product even though you’ve largely built it for yourself.  This is because it is highly unlikely that your firm is the only one experiencing this problem.  You see, many professional services firms in a similar vertical encounter the same problems.  As such, they are either already aware of or searching for a software solution to the same problem that you are and if you solve it then you now have tremendous value to offer to them.  In this case, the clients of your future product would NOT be the current list of clients for your current services, but instead, professional services firms similar to yours.

I know this concept takes a unique approach, but trust me it can produce tremendous results for many reasons.  Several of which we will go into greater detail in a later section in this article.  For evidence of just how dramatically this strategy can positively impact a professional services firm like yours, read more about the story of Basecamp.

Now, let’s talk about the second strategy to consider.

Solving Your Client’s Problems (Strategy B)

The second strategy I’d like you to consider is solving problems for your current target market clients.  You should be familiar with this strategy because that’s what your current list of services are supposed to be doing as well.  This strategy sends you on a mission to search and find the biggest challenge experienced by your current list of clients.  The objective here is to identify your clients’ biggest challenge and build a software solution around that problem in the form of a software product.  The goal here is to be able to provide your clients with significantly more value at a significantly lower cost than you are currently providing through your services.  At the moment, you are probably frustrated by the fact that your services don’t scale particularly well.  That will not be the case with your software product.  Your software product will scale very well.  As such, armed with this product, you can provide a lot more value to a much larger audience.

The solving your client’s problem strategy is primarily intended to offer value to your client through your product.  The benefit to your organization is secondary, but significant.  You can offer more value to a larger audience at a lower cost.  This means much higher margins and an excellent way to diversify beyond what you have to offer today which is exclusively a list of expensive services.  This strategy will also provide you with the ability to lower costs and boost revenue which will inevitably lead to higher profits.

We will get into the details of the advantages and disadvantages to this strategy in the next section, but I want to clarify that investing in this strategy will not require you to sell to a new audience.  It will however, provide the opportunity to do so.  What I’m referring to is the ability to expand into new markets.  Since your cost to deliver value is much lower due to the advantages of investing in a software product, you can now also offer the solution at a lower price point providing you with access to previously untapped markets and new revenue.  This development should be getting you very excited.

The exciting, but cautiously optimistic reaction you may have to this strategy is likely around potential expansion efforts.  I know it may feel different to be talking about expanding into new markets, but I’ll explain in greater detail in the next section why this is a great area to invest for your professional services firm.

Now that we’ve covered some of the details of each strategy, let’s talk about the respective pros and cons to each.

The Strengths and Weaknesses of Solving Your Own Problems

Please note: Before I continue, please realize that you really can’t go wrong with either of these strategies.  They both offer benefits to your professional services organization and your client.  In reality, what we are attempting to nail down is which option makes the most sense for your professional services given the nature of where your firm is currently.

Strategy Strengths

Building a software product solution to your own problems has a lot of advantages.  Two huge advantages are that you already have direct access to the discovery data we need and you are the customer.  All of this means that we can move through the discovery phase more quickly.  As mentioned in earlier articles, discovery is the key first step in the process towards product success.

Whether they know it or not, it’s your current internal team that has access to the discovery data we need.  They are experiencing these challenges on a daily basis and know them better than anyone.  Our job is to unlock them through the discovery process.

We need to know everything about the customer and in this case, it’s you!  This means no one will know our target customer better than you do.  At this point, I’m sure you are starting to see the advantages to this approach.

Another key advantage of this strategy is that we are building a software solution for you.  That may seem obvious at this point, but the impact of that decision may not be yet.  Since we are building for you, your professional services firm is going to receive immediate benefit.  This strategy has that major advantage over building to solve your clients problems.  The benefits of that strategy for your firm will take longer to materialize.

Strategy Weaknesses

Please note: Before I continue, when I say weaknesses I’m really splitting hairs.  Both of these strategies are well worth investing in for your professional services firm.  I both believe in and have helped clients succeed with both of these strategies.  Again, my objective here is to communicate all the details to you so you can make the best decision for your professional services firm. 

Now that we’ve covered some of the respective strengths to the solving your own problems strategy, let’s talk about some of the topics that may give you pause when determining which strategy is right for your professional services firm.

The first, is that this investment in a software product is not directly for your client, it’s for you.  This may give you pause because as an operator of a professional services firm, it’s likely that almost everything you do seems to be for your clients directly.  However, sometimes investing in your firm is the best thing you can do for your clients.  It’s a similar concept on airplanes in emergency situations.  They tell you to put your mask on first before you can help passengers because you can’t do much if you’re unconscious!

The second, and probably more jarring, is that you won’t be selling this solution to the same target market client of your services.  Instead, you’ll be selling to professional services firms like yours.  This requires other changes.  You’ll need to invest in new sales procedures and marketing strategies.  However, these adjustments are among the easiest you can make because no one knows firms like yours better than you do, you’ve built one.

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So while these potential detractors are minor, it’s important that I mention them so you can prepare yourself for what’s to come if you ultimately select this strategy.

The Strengths and Weaknesses of Solving Your Client’s Problems

Strategy Strengths

There are some exciting advantages for building a software solution around challenges experienced by your client.  The first, is that the experience for both you and your client is an engaging one.  A phrase I share a lot is that the only thing people like talking about more than themselves are their problems.  As part of this process, you get to use this fact to your (and their) advantage.  Investing in this discovery process will show your client that you care deeply about making their world and lives better.  You are taking the time to hear them out and making plans to actually do something about it.

Additional advantages to this strategy are related to the benefits your professional services firm is expected to receive.  What I’m referring to is the opportunity to boost profitability and expand into new markets.  As an operator of a professional services firm, you are well aware of the fact that companies like yours don’t scale very well if at all.  At most, you can hope to benefit from a linear improvement to the bottom line from any attempt or investment into scaling your current model.  If instead, you invest in a software solution or product to provide value to your clients, that will change your scenario in a significant way.  Products do scale because the cost to deliver the value to your client is largely automated through software and this lower cost means greater profits.

The opportunity your product will provide to expand into new markets is very exciting as well.  At the moment, you are likely unable to qualify certain client prospects.  This is likely due to the fact that they either can’t afford your high ticket services or aren’t ready for them.  However, this doesn’t mean that they don’t need or want your solutions.  In fact, it’s often the opposite.  Some of these clients could stand to benefit the most from having access to your solutions.  If instead, you had a solution to offer them at a price point that works for you and them, now you have a match.  This means that your client gets what they want and you start developing the relationship now while capturing the revenue and providing value.  I can’t underscore how big of a game changer something like this can be for a professional services firm like yours.

Tip: That last paragraph highlights something critically important.  If you want a leg up on your competition, you won’t find it investing in services.  Instead, you should do so by investing in a software product.  Done right, the ROI you are likely to experience is tremendous and will dominate anything to ever come out of your service factory.  However, this is a race condition.  Your competitors are reading this too and if they invest before you do they will win the race.  I don’t want you to rush, but I do want to underscore that there is a sense of urgency here.

Strategy Weaknesses

While solving client problems has a lot of exciting advantages and possibilities, I want you to be aware of the limitations and potential topics that may give you pause when determining whether or not this strategy is right for your professional services firm.

The first is that this strategy carries with it an inherent higher degree of risk.  However, this is largely due to the fact that we don’t have immediate and direct access to the discovery data and that there are still things we need to learn about our clients throughout this process.  It is important to mention this because this strategy carries a higher failure rate than building software solutions to solve your own problems.  This isn’t meant to scare you, it’s only intended to provide you with adequate information about each strategy so you can balance your risk and reward at the current phase for your professional services firm.

The second element to consider is that while your return on investment (ROI) has the potential to be higher, the path of getting there is likely to take longer.  As such, you are looking at a potential longer investment horizon.  Again, this is due to the nature of the strategy and the fact that there is more to do because you aren’t the customer in this scenario.  The good news is that, depending on the previous success of your professional services firm, you likely already know your clients rather well.

These limitations are minor as well, but something you should consider when evaluating which strategy is right for your professional services firm.

Choosing the Right Strategy for Your Firm

We’ve talked about each strategy independently and reviewed some of the pros and cons to each approach.  In this section, I want to talk more about which may be right for you given the current situation and priorities of your professional services firm.

Comparing The Strategies

Depending on your goals and investment horizon, one or the other strategy may make the most sense for your firm.  We compared each in the previous section, but I wanted to provide some general guidelines to make this process easier for you.

The simplest way to think about whether you should invest in a software product by building solutions for you or your client should be dependent on a couple of factors, primarily timeline and risk.

If you’re interested in experiencing a more immediate impact and reducing your risk, then I would definitely recommend solving the problems of your firm first.

However, if you’re comfortable assuming greater risk and instead are more interested in the potential to receive a greater return on investment in favor of a longer term investment horizon, then solving client problems with your future software product may make more sense.

Starting Small

By far the best thing you can do to increase your chances of success is to keep the process simple and start small.  Leverage Learn Startup concepts and strategies to make progress more quickly and prevent falling into a trap of investing too much time, energy and capital into a venture that is unlikely to materialize or has a high failure rate.

Also, if you’re brand new to investing in software products I would encourage you to invest in solving your own problems first.  The advantages you’ll experience from the section above, namely access to discovery data, will make your first investment into this world go much more smoothly.

However, if you’ve had previous successful ventures into product, then I would be more comfortable recommending that you decide to start solving external client problems with software solutions.

The bottom line is that you can’t go wrong keeping your plans and path of execution as simple as possible.  The ultimate goal is to build fast and cheap.  That way you can focus on the most important aspect, which is getting the product into the hands of your customer as quickly as possible so you can learn – even if the customer in this case is you.

Building Momentum

Another element to keep in mind is that you don’t need to limit yourself to only one of these two options.  I’m simply encouraging you to choose one to start.  For example, it’s perfectly reasonable to start with one then leverage the other or vice versa.  My recommendation here would be to invest in building a software product solution for the top problem for your firm, then after gaining that experience (and assuming that project goes well) at that point you will be well prepared for investing in solving problems for your clients.

The key point here is strategy is critical to your success, but experience matters.  As has been said before, there is a difference between knowing the path and walking the path.  What you will learn in the process of building and selling your first product will have a major impact on your ability to successfully invest in future products.

Getting Started

To get started you will need to pick the strategy that makes the most sense for your professional services firm.  From there, you’ll want to build your product plan to success.

Once you’ve completed these steps, you’ll want to begin discovery as soon as possible.  Who you complete discovery with will depend upon your strategic decision.

Hiring Help

A product strategist is the person you’ll need on your team to help you make critical strategic decisions that will have a major impact on the success of your investments into software products.

I offer my services as a fractional product officer and strategist available to help you and your professional services firm succeed in product.

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.

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