I experienced a moment of synchronicity this past week concerning services strategy. Synchronicity is the experience of two or more events which are causally unrelated occurring together in a supposedly meaningful manner. In order to count as synchronicity, the events should be unlikely to occur together by chance. The two separate and distinct events that occurred last week were these:
- I participated in a meeting where a person asked “What is your hypothesis regarding what our services strategy should be?”
- I listened to a podcast from NPR where they discussed the book Not Quite What I Was Planning: Six-Word Memoirs by Writers Famous and Obscure. This is a compilation of six word sentences provided by folks that summarize their lives. Interesting concept.
These two disparate events came together in my mind when I realized that I can, indeed, boil down all of my hypotheses regarding services strategy for product companies into to six simple words.
The importance of services strategy to a product company presents itself in three distinct situations. For each situation, I can summarize the importance of services in six words:
First Scenario: Getting Products Adopted
Great product, forgot services, company fails
This six word services strategy applies to the scenario when a product company needs services to help accelerate product adoption. The product is new to the market and has potential, but customers needs help gaining the benefits of the new technology. If product companies forget to create enabling services directly or through partners, product adoption languishes and the company can fail. Not because the product was not solid, but because the required services were not in place
Second Scenario: Buying Time
Old product, services buffer, next product
This six word services strategy applies to the scenario when an existing product is beginning to mature and there is a lull before the next generation product is really taking off. This is the classic “s-curve” described by Everett Rogers in his 1962 book, Diffusion of Innovations.
During the slow portion of early product adoption, revenues from the existing product are flat or declining. To maintain the top line, the company needs a source of revenue. That source can be services delivered to the existing install base. This phenomenon is what I previously described in my post on the services buffer.
Third Scenario: Changing Profiles
Old market, new services, new company
This six word services strategy applies to companies that serve a market that is maturing. Despite new innovations in technology, customers are just not willing to pay more for the product. Think PCs, Unix servers, hardware storage, printers, etc. In this scenario, companies either find new product markets to explore or they create new ways to add value around commoditizing products. This shift in the value proposition creates a fundamental shift in revenue mix and a shift in the overall company strategy. This services strategy scenario has applied to many product companies, not just IBM. Companies that have experienced “old market, new services, new company” include Xerox and EMC. The impact of this scenario on revenue mix can be dramtic as shown in figure below.
I have been working on the intricacies of services strategy within product companies for over a decade now. I have a third book on the topic in the making. It is hard to believe I can boil the essence of that entire body of work into three sentences, each with only six words. Yet there they are. Three services strategies. It is highly probable one of these three apply to your product company right now.