Why you should build a productized service before you build a software product

by Sean Boyce

I talk a lot about the high failure rate of people attempting to build successful product businesses.  That’s because I also want to share everything I know that can improve your odds of success by leveraging product strategies that have been proven successful.

I’ve previously compared strategies of building a software product vs a productized service and shared the merits of solving your own problem.  In this article, I want to share with you why it can make a lot of sense to build a productized service business before you ultimately decide to convert your business into more of a software product.

Background

I’ve built several software product businesses myself and helped countless clients with the same.  People constantly underestimate how inflexible and expensive it can be to build a software product business.  To have the best chance of success you must be certain that what you are about to build has people lined up desperate to use it and that they are ready to part ways with their money to gain access to your product.  Otherwise, you will wind up building the wrong product.  This is the equivalent of building the wrong home for your family to move into.  How easily can you remove or add a bedroom to a house that’s already built?  Sounds expensive.

What you need to realize is that there is a time and a place for building a software product.  That is typically when you’re ready to reach a crazy high level of scale.  Once you are absolutely certain about the demand for more of your product, software is the most effective way for your solution to reach that level of scale, but not before that point.  

What’s critical to realize is that your primarily early objective is to validate your value proposition.  This means to ensure that your product actually does exactly what people need.  Until you have this product-market fit, building software will only increase your probability of failure.  This is mainly because, like adding a bedroom to a house that’s already built, software is inflexible and you need something that can be changed rapidly so you can test again and again until you get it right (product-market fit).

For these reasons, I might recommend that you evaluate a productized service model until you’ve validated your value proposition and before you entertain adding a significant software element to your product solution.  This model is a much better fit for an early product company and can significantly increase your chances of success.

Let’s talk more about why it makes so much sense to consider building a productized service model first.

Faster to Market

Since your product will incorporate little to no custom software at this early stage, you can move much more quickly.  Historically, software can take a very long time to build.  Productized services, on the other hand, are simply procedures followed by people on your team.  Those can be built in hours or minutes and updated just as quickly.  

If you already run a service business then you probably already have a team ready to implement the first version of the procedure you’ve developed.  If you’ve solved your own problem as well then your team will likely also be relatively well trained on how to do it.

Each of these components means you can move so much faster during this phase of the project.  Speed is key here because as you identify clients that have a need the more quickly you can put your solution in their hands, the more quickly you can validate your product’s value proposition to determine whether or not you have product-market fit.

Cheaper to Build

In addition to taking a long time, building software products can also be very expensive.  This is typically because when people build, the process is not very well known, and as such, your ‘scope’ keeps creeping or changing as you update what you want the software to do as you are building it.  Scope creep can absolutely ruin software products.

Since you don’t have any custom software to build, your ‘build’ here is going to be a whole lot cheaper.  This is yet again because we’re actually building a procedure which is just a series of steps to be carried out by your team to complete the process of delivering value to your customer.  I write procedures in less than 10 minutes all the time.

Again the objective of this phase is to validate the value proposition for your product.  So after you’ve developed your initial procedure, you can immediately begin validating it with customers that have expressed a need for your product.

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Improved Flexibility

Since, you haven’t built an inflexible software product because you’ve instead opted to build a productized service, also realize that it can now be changed relatively easily.  I really can’t underscore enough just how significant of an advantage this is for you.  This element may be the most valuable reason to build a productized service first.  Simply because whatever procedure you build at the start is subject to change upon receiving customer feedback.  You won’t get it 100% right the first time.  No one does and changing your value proposition is a good thing because you’ll be responding to the market to find better product-market fit.

Allow me to provide an example.  My productized service business, Podcast Chef offers effective lead generation for consultants through a podcast.  Initially we didn’t offer a particular service called  ‘Guest Booking’ as an included element of our value proposition.  This is where we’d actually book guests for you on your new podcast.  Originally, this was an add-on feature to our productized service.  Long story short, it turns out this feature had a lot of potential to offer value when utilized, but people didn’t really know they needed it.  As such, I changed our model to include it by default and ever since it has dramatically reduced the amount of time required to offer value to our customer.  In this case making this change was easy, but that’s only because it was a productized service.  If it was software, it could have taken me weeks or months to add or build this into the product.

To put it rather simply, a productized service is much more flexible than a software product.  Next, I want to further reinforce your primary objective.

Focus on the Mission

There’s plenty of time to scale your product to the stratosphere.  Don’t worry about that now.  Instead, focus all of your efforts on validating your value proposition.  To put this another way, we want to make sure the model you’ve designed actually solves your customer’s problem.  If it does, you are on the right track and should keep going.  If it does not, you’ll need to make some changes before your product is ready to offer real value to your customers.

The key point here is almost everyone I speak with that wants me to help them achieve success in product is obsessed with scale.  I get it, it’s very exciting.  Please realize I fell into this trap as well with my first software product and I’m here to help you avoid making the same mistake.  I’ve learned to prioritize product strategy and complete the steps in a different order to dramatically improve the chances of achieving product success.  So just know that I’m speaking from experience when I say that what matters now is not building something that will scale infinitely out of the gate, it’s validating your value proposition.

All of this is not to say that software won’t play a role in the success of your product business.  In fact, it can and may very well play a large one.  So let’s talk for a moment about when and where you should leverage the strengths that software can provide.

When to Leverage Software

You can achieve a lot of success with a productized service model.  I’ve listened to a great podcast episode recently about another productized service model called Testimonial Hero that has recently crossed three million in annual revenue.  This could be you if you experiment with and ultimately want to stick with this model.  However, if you’d like to scale even further then we can talk about how software can help after you’ve validated your value proposition and are ready for scale.

Software is faster (not necessarily smarter) than people and since it is a tool like anything else I want you to think of it that way in terms of when you should use it.  When you’re ready to speed your process up or automate one or more of the steps, you should look to software.  I’ve been doing this for decades.   Build the process, test it to make sure it is effective then automate it and reach maximum efficiency.  Rinse and repeat.  This is the process you should follow when your productized service business is ready to reach ultimate scale.

Keep in mind that you don’t have to transform the entire process into a software product.  You can simply automate the steps of the process that are most well suited for it.  This can be anything from one step to all the steps.  You get to decide.  Think of it like the story told in one of my favorite books, The Goal.  Look for opportunities to eliminate the bottleneck in your process.

Getting Started

To get started here you need to know the problem you’ll be solving for your target market customer.  Beyond that, you’ll need to design the initial version of your value proposition for your product or how you will actually solve that problem.  Once you are ready with a product, you’ll focus on testing it until you can produce consistent results that provide value to your customer.

Hiring Help

I can help you build a plan to success for your aspiring product business in the form of a product strategy roadmap.  Having this roadmap will ensure that you’re completing each step in the right order to maximize your potential for achieving product success.

To learn more, email me at sean@nxtstep.io.

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