How to Turn Professional Services Into Products

Product management is one of the fastest-growing roles in business, having gained increased scope and importance in Silicon Valley. While product managers used to be hired almost exclusively by technology companies, they are now being recruited in growing numbers by service-oriented businesses as well, with firms such as Accenture, Chase, JPMorgan, Optum, and Vanguard adding product management functions in the past few years. Why are services companies looking to add product capabilities to their organizations?

Professional services firms, which span a wide range of sectors, including IT, legal, marketing, and tax and accounting services, face two major growth challenges. Owing to the significant human involvement in service delivery, their gross margins are low, and their head counts scale linearly with increases in revenue. Product companies enjoy much higher growth margins and revenue per employee. This explains why startups that offer software-as-a-service products are valued at six to eight times their annual revenues, whereas startups that offer project-based services are valued at one to two times their annual revenues.

Recognizing the challenges of margins and scalability, professional services firms are trying to evolve into product-like companies by productizing their services. This involves automating, standardizing, and packaging aspects of a service into a tangible, repeatable, and scalable offering that is efficient to produce and easier to scale.

Consider, for example, Littler Mendelson, the largest labor and employment law firm in the United States, which has developed a proprietary platform that productizes aspects of legal case management. Littler CaseSmart combines a case management system with a network of specialized attorneys who use it to deliver legal services more efficiently and provide clients with a more predictable cost structure and faster access to case information and analytics. The platform’s dashboard provides real-time tracking of legal matters, documents, and deadlines and offers insights into litigation trends. This digital product has allowed Littler to deliver legal services at scale, improve client outcomes, and enhance its ability to manage a high volume of cases effectively.

Unlike bespoke services that are highly customized for each client, productized services can be standardized and delivered repeatedly to multiple customers with similar needs. (See “Benefits of Productizing Services.”)

“The MIT Sloan Management Review is a research-based magazine and digital platform for business executives published at the MIT Sloan School of Management.”

Please visit the firm link to site