How Productizing Your Services Can Boost Your Business Valuation with Eisha Tierney Armstrong

Welcome to the podcast that’s dedicated to helping business owners prepare for exit so you can maximize value and then exit on your terms. This is the Exit Insights podcast.presented by Succession Plus. I’m Darryl Bates -Brownsword. And today I’ve got a very special guest. I’ve got Eisha Armstrong from Vectaris here to join me. And she’s going to share with us thoughts and her experience on what we need to do to productize our services when we’re a professional service type organization. What does it mean that the things I’m really keen to ask is, you know, what does it mean to productize? What are the benefits? How will that increase our valuation? Before I sort of put too much on a plate, Eisha, thanks for joining me today.

Darryl. It’s my pleasure.

Excellent. So, Eisha, why don’t you give us a little bit of a start about background about what it is you do and what do you do at Vectaris? Because I think it’s really relevant to business owners, especially those who run service style businesses, just to set up the conversation, really.

Yeah, of course. So we work with leaders at B2B services organizations. So professional services firms like marketing agencies or consulting firms or accounting firms, engineering architecture, those types of organizations that make their money typically by trading their expertise and their time for money.

What we do is we help them productize, which means how do they standardize and scale their services so that they’re not key person dependent on them to deliver. So that could be something as simple as, like I said, standardizing the way it’s delivered, using technology to deliver it, packaging it.

in a way that’s more standardized to consume, but it could also be creating a product. that’s really helpful, especially for owners, leaders who are thinking about how do they work themselves out of a role? How do they create more value in their organization?

Yeah. And how long have you been doing this for? Productizing services?

Yeah, so we’ve been doing this now for over six years, but I started my career at a company that was really the pioneer in productizing consulting services. And I spent 15 years there in product management, product leadership roles, and then started this current firm in 2018 when we saw a lot of private equity money coming into professional services.

And a big part of their hypothesis was let’s productize these professional services businesses to increase their valuation.

Okay, so. If the way I’m seeing it is from a, and I’m no economist, but I’m seeing the way the economy has evolved over, I don’t know, the last hundred years. In the mid 1900s, say, we had the industrial revolution and that prompted, I guess, the goods economy in my mind. My simple mind is that through the 1940s, post -World War II, there was a boom of products being manufactured and, I’m thinking lawnmowers, washing machines, kitchen, know, anything to make our life easier. And there was always a first mover to market with one of those. And if you wanted a new lawnmower, there was only one manufacturer of a lawnmower initially, and you had to go to them and, know, it was easier, well, from SunSense says it was easy to sell because you’re going, here’s a lawnmower. It’s really clear at what it is. If you want it, you got to come to us to buy it from us.

And it’s obvious what it does. So you know what you’re getting. You’re getting this tangible thing that you buy and and bang. Now, I guess where we’ve got a law knowing business where you don’t acquire the lawnmower, you just pay someone to come in and mow your lawn. And so they’re using a product to sell your service. And there’s kind of an evolution.

But now, well, now I guess the last 20 or 30 years, you know, we look at things where they’re not even using a good to deliver a service, they’re just using IP knowledge, know -how, experience to go, hey, you’ve got a problem, whether it be a legal problem, a design problem, a tax problem, and a numbers problem, let me use my intelligence, my know -how, my knowledge to do this for you. And buyers can’t see it. This is the problem, right? They’re not exactly sure what they’re gonna get for their money.

And a lot of these organizations are really entrenched in going, and the whole industry or the economy, if you like, is really set in its ways of going, well, the only way to buy that service, that professional service, let’s say, is to pay for time. And the real downside of that is that that’s really encouraging the person to take their time to deliver the outcome. And what I guess I’m trying to say is the whole economy, the whole of marketplaces, entrenched in selling time and we’re locked into that. And for you to be doing what you’re doing, you must have a massive hurdle to overcome to try and get people to change their mindset and to really start creating new ideas to go.

Well, selling time is not the way to go. The client doesn’t want your time. They want the output. And I’m just rambling now, but how do you deal with all of that? guess that’s -crew inertia to overcome.

Yeah, so most of the organizations we work with, they’ve already decided that productization is a good strategy for them.

And so usually I’m not in the position, Darryl, of trying to convince them that this is a good idea. It’s more, how can they do it successfully?

Right. They’ve arrived at that.

Because honestly, Darryl, the benefits are so significant. So if I am just selling my time, I’m limited in how much money I can make based on how much time I have within the business. If I want to grow my business, the only way I can do that is by hiring more people who have the same expertise that I have. And that’s not easy to do.

And they may not be delivering at the same quality level that I’m delivering at. So if I don’t find a way to standardize what they’re delivering or in quality, assure it that it’s going to be hard for me to grow successfully. It’s also, you know, with technology, there are more competitors who can offer the same type of value or solve the same problem and not have to do it using time. Perhaps they’re using generative AI or something like that. So I’m at risk of being displaced if I don’t do this. back to the point of your listeners, if I ever want to exit, I have to show a potential buyer that this business can operate without me. But if all the business is is my expertise, what’s in my head, what’s my time, that’s going to be very difficult to do.

So thankfully, I’m not often not in the position of trying to convince people that this is a good idea more. It’s, it’s okay. Now, how can I do this successfully? And we, we have seen through the work that we’ve done a lot of common mistakes that owners leaders will make when they try to productize their services. So they’re relatively predictable and we can help them try to avoid those mistakes.

Well, you’ve set me up. You’ve got to tell us what some of those mistakes are.

Yeah. So one of them is, again, a lot of professional services providers, they’re working one -on -one with clients and they’re providing customized services one -on -one. And they may start to see a pattern of a couple of clients asking for the same thing and they’re delivering it the same way. So they think, I can standardize this. I can create a playbook. I can maybe create some software to help do this.

And then they’ll go out and they’ll spend money in developing a product upfront. And then they’ll launch it into the marketplace and they’ll be surprised as to why it’s not as successful as they think it is. And there’s usually a couple of reasons. So the first one is they didn’t really validate whether or not this was a problem that a large market segment had. You know, they heard it from a couple of clients, but they didn’t actually do their market research to see if this was a problem that a lot of clients had.

Second, they didn’t think through. How does this complement the services that my existing business is already known for? So is this something that’s going to cannibalize my services revenue, or it’s something that’s perhaps going to be sold alongside my services revenue? So that’s another mistake that we see.

And then a third mistake is just assuming that they can sell it the same way that they’ve sold their services in the past. And as you probably know, selling a product is very different from selling a service. So those are some of the common mistakes that we see. And again, they’re easily avoidable, but it requires owners and leaders of B2B services firms to just think differently about how they create value. So again, rather than it being about my time, my expertise, my relationships, it’s more about my intellectual property and the problem I’m solving for my customers.

Okay, and how do you see the relationship between systemizing and productizing?

Yeah, that’s a great question. So I think about productization as a spectrum. And let me give you an example. So let’s say you’re a face painter. OK? So you’re a service provider. You go to children’s birthdays parties, and you will paint on children’s faces any kind of design that they want. That’s an example of a customized service right? I’m going to a party. I’m selling my time I’m putting whatever design the child in the chair wants on their face using my artistic skills All right, and I think all right. I want to systematize this so that maybe I can hire a helper And they can come with me and do more face painting or I can send them instead of me going well now I’m going to create like you know a set package of different types of designs that I do, like eight different designs. And I give the child eight choices and they can choose from that. And I train my people on how to do these eight designs really well. That would be systematizing. And it’s what we call productizing services. So it’s still a service. It’s still delivered by a person who has to paint the design, but they’ve been trained on a set number of designs. They’re offered up as a menu to the customer and it’s not kind of bespoke, customized, whatever type of design that you want. Then as we kind of go down the spectrum, think, okay, now I decide instead of selling my time and going to children’s parties, I’m just going to provide them with face tattoos. So those temporary tattoos that they can put on their face. That would be a product, right? So now I’ve taken my design, my intellectual property, I’ve really productized it by making it a tattoo that the child just sticks on your face. They don’t even need a person to get the face design. They just purchase it. And then the real kind of goal for a lot of organizations that we work with is to try to create some kind of recurring revenue. So let’s say I’m that face painter. I’ve done these tattoos that people can self -apply. And now I’m going to do a face tattoo of the month and people pay a subscription fee and they get a new face tattoo mailed to them every month and they can put it on their face. So that’s kind of an example of the spectrum of productization all the way from customized services, I’ll do whatever kind of face design you want to a face tattoo of the month club.

That’s really helpful, We’re going from, I guess, high value, totally bespoke. I need someone with lot of experience, a lot of training, a lot of expertise, a lot of creativity to be able to think on their feet and adapt in the moment through to going, hey, look, let me train you in these handful of standard ways of doing things so that you can deliver day in, day out on this handful of systemized approaches through to, well, hey, look, I’ve templated, if you like, a number of these systemized into templates that just, I was going to say iron -on, but that’s probably not appropriate for kids’ bases and parties, but stick on so that they’re pre -made and they just apply, for example, all the way through to, hey, we’re now moving into the subscription economy. We had Robbie Kelman on the podcast a little while ago, so this ties in beautifully to turning it totally into a subscription, which you can just run it from your kitchen, I guess, or what have you. You don’t even need to be involved and to show up at the party anymore. Totally different party experience, but there’s the pure, I guess, evolution of the product or the product through the service or in this case, where the service back through to the product.

Now, when you’re buying a subscription or the template, if you like, or the face tattoos, I think you called them, it’s totally clear what I’m going to get in advance. I know there’s no risk there as a buyer, but if I’m buying your service, I’ve seen you work before, but as you apply it to me, there’s still a little bit of risk every time you do it. And by productizing is eliminating the risk and the time and the cost of delivery. they the main benefits or what else are we missing here? What am I missing?

Yeah, so I think another benefit from the standpoint of the consumer is usually price.

Right.

So it’s probably much more expensive to have that artist come to your party, do any custom design than if you just pre -purchase a couple of temporary face tattoos that kids can stick on their face. But the thing that’s important to note about this is along that spectrum, you’re probably serving a different target market. So the market that has a high willingness to pay for something that’s very customized, very bespoke, is going to be different than the market that’s willing to just take one of six or seven designs, have the kids stick them on the face themselves. And that’s, think, a mistake that a lot of leaders make as they think that as they productize, they’re still serving the same market when in actuality they aren’t. And there’s different needs and willingness to pay along those different phases of the productization spectrum.

So there’s a trap to be aware of. If you’re thinking of productizing your service, be aware of the impact or the effect that that has on the market that’s going to be looking for this, I guess, higher volume, more off the shelf style of solution that you’re now offering. And is that one of the traps that businesses fall into is that they miss the difference in market they’re now attractive to?

Absolutely. Yeah.

Yeah. And that’s why usually when we’re working with organizations, we’re talking less about how do you take what you’re currently doing and purely productize it and more, how can you create a product that complements your existing services? So sticking with that face design artist, a product that would complement the services would be some type of product to remove the face tattoo after the person is done at the party, some type of facial wipe or something like that. Or it could be a photo of the photo booth and the person gets to take a picture home so they can remember what they look like with it. So it’s something that complements it as opposed to something that replaces it.

Brilliant. Okay. So there’s the process, the concept, you like, mapped out and it’s a really nice example. I’m sensing and how do you apply this? When you’ve got a business such as an accounting practice or lawyers who’ve got highly experienced, highly skilled, experienced people who are going… Hey, look, you just can’t productize what I do. You need to know, you need to have the 20 years of experience of being doing what I’ve been doing. It’s human mind, it’s being able to weave through all the nuances of the specific situation. You just can’t productize what I do. How do you overcome that sort of resistance?

Yeah, so we do it by testing and learning and demonstrating in the market whether or not things work. So this is not an idea I came up with. It’s called lean product management, lean product design. It’s a key part of things like design thinking where you quickly prototype what your solution might look like.

And then you test it in the market to see, one, is it feasible? Can it actually deliver perhaps what this highly skilled attorney or accountant was delivering? And two, is it something that people are willing to pay for? And then you get a little bit of information from the market. And then you iterate on the product. And you kind of update it a little bit. And then you take it back out to market again. And you learn some more. And then you iterate. Yeah, so this test and learn, which technology companies are great at doing, professional services firms not so great at doing, is a key skill set that we try to build in the organizations that we work with. If they’re going to really be serious about productization, they need to learn how to test and learn quickly.

So you’re really embracing what product manufacturers do. They’ll go to market and test and learn. it’s a new lawn mower, I’ll get to go back to that. Well, two blades, four blades, what sort of motor, electric nowadays, wireless, wire cable, what’s gonna work? You need to produce a couple of prototypes, take them to market, take it to your target market and see what they think. And that’s what you’re suggesting, isn’t it?

Correct. And unfortunately, Daryl, this is something that is hard for most traditional professional services firms to embrace because they have a tendency to want things to be perfect before they give them to clients. And if you’re doing kind of test and learn rapid iteration, you’re probably not going to have something be perfect by the time you show your first prototype to a client and get their feedback. So it requires them to rethink how they interact with clients and also to be clear in their communications with customers. Look, we’re trying this new idea. We want to prototype it. We want to get your feedback. It means it’s not going to be perfect. It’s going to be more like an app on your phone that’s updating every other week but I want to co -design and co -develop this with you. And that’s a very different conversation that most professional services providers are having with their clients, which is, I’m the expert, this is perfect, here you go, here’s your final delivery.

So what you’re alluding to now is that if you’re going to go down this productization route of, guess, one of the benefits is you get more mass production of your proposition to the market, which leads to profitability and reduction of reliance on key people. But it sounds like you’re suggesting there’s a significant cultural shift required if you’re going to go down this route.

It is, yes. And it’s one that we didn’t fully appreciate until we started working with firms over a couple of years. And they would identify, Darryl, these great product ideas where there was a clear need in the market and they’d complement their existing services and they’d put enough resources behind going to market and marketing and selling them. And yet they weren’t successful.

And it was like, what’s going on here? And when we dug into it, what we saw was a lot of self -sabotage and the organization not truly embracing kind of a more agile, nimble way of developing and working with clients that would help them successfully productize. So we’ve now spent a lot of time going back to organizations and talking about the change management that’s required if you’re going to succeed.

And that includes everything from creating a very strong vision. Why are we doing this? Because a lot of employees may think, I’m going to be out of a job if we productize what I’m currently delivering as a professional. So kind of assuaging that fear is a key part of a leader’s role. But getting very clear on the why are we doing this, what are the different types of skill sets that we might need to bring in the organization? And then again, how does this complement? What we’re already doing versus how does this, you know, that way you can kind of get rid of the fear of this might replace what we’re already doing.

So it enables you to build a product strategy of going, well, hey, look, I’ve always just done this one thing and I’m really good. Our business is really good at doing this one thing. And now it sounds like you’re expanding your opportunity rather than just servicing one marketplace or one section of the marketplace. You’re going, well, look, if you go down this productized route, because it’s less in the UK, we say bespoke, but if it’s less customized, that might be attractive to a different segment of the market, which you didn’t normally serve. So you’ve opened up, you’re not necessarily requiring additional employees because it’s productized, or if you do need more employees, you might be able to get away with a few employees, but you’re really opening up your opportunities and your marketplace to serve a greater audience than you had in the past.

Perhaps. So usually, again, there are different strategies for productization. So one would be I productize to develop things that complement my existing services and serve my existing marketplace. So that would be the example of the face painter creating, you know, facial remover wipe or something to take the face design off after the child is run around at the party. That would be serving the existing market, but with a product that complements the customized services. Another strategy would be to productize to serve a different market segment, usually a more price sensitive market segment that is willing to have a less bespoke offering. And those are two different productization strategies.

Yeah, you can go down market or up market, can’t you? You can, yeah.

Right. Or you can expand share of wallet with your existing market.

Yeah, I was just thinking about the face painting, perhaps not the best example, because I remember when my kids were little, they didn’t want to take it off.

Right, yes, yeah.

But Mum did when it’s about bedtime or bath time, it was kind of come off. Brilliant. OK, so we’ve we’ve talked about these different strategies that you need to productize. You need to be aware when we say productization, it’s not just one thing. It can widen your market. can narrow your market. It can.

It can be similar to systemizing what you already do so that you don’t need such highly trained people. You can get people in and train them yourself. You can. You need to be aware of the cultural implications on your business. And we haven’t actually said this, but I think we’ve implied it is that, you know, that some of that cultural culture that we need to overcome is the egos and the hurdles that we need to overcome of professionals who perhaps are feeling threatened with things being taken away from them, or perhaps even losing their jobs or seeing that what they offer is being undervalued or undermined even. We need to explore. the thing that I think is the biggest impact coming forward, and you’ve only just skimmed the surface on this, is how does AI influence all of this moving forward? Well, not even moving forward. How is it influencing things now?

Yeah, that’s a great point. So I kind of alluded to it when I talked about some leaders may want to productize because they perceive competitive threats out there, especially where you start to see generative AI doing the work that professionals used to do, at least kind of the lower level work for now. But I think the first thing is realizing that generative AI is a great opportunity to further standardize and scale what you’re already doing. So it is an opportunity and take, for example, accounting firms who do audits, right? There are accounting firms that we work with now who just in the past two years have been able to automate 40 to 50 % of the audit work that they do using generative AI. And so that frees up their professionals to spend their time on higher value work. It also lowers the cost of the audit to the end client. They’re still delivering a service, which is an audit, and it still needs partners to review the work and to sign off on it, but it’s more tech enabled than it used to be because of generative AI. The next example is now if you freed up these professionals to do higher level work, what are new problems that you can solve for your clients that you couldn’t solve previously, either because you have more time or you have more access to data and can process things faster using technology?

And I think that’s a much more interesting conversation to have than just how do you make what you’re already doing more efficient. But it’s like, okay, we’ve made that more efficient, but now what are new things that we can do that we couldn’t do before? And new ways to serve our customers, new opportunities for growth rather than just focusing on efficiency.

Which ironically leads us back to those highly educated people, highly experienced people who are creative to get them out of that rut of doing the low value work or the grunt work because that’s all being automated now. It goes, okay, so how can you apply your experience and your expertise to solve bigger, more important problems for the clients, which are also of greater value to the client?

Exactly. Yes. Yeah.

So the business can become more profitable. Okay.

So I have a big believer right now in the power of generative AI. And I would certainly advise those owners, leaders of services organizations that are listening to your podcast that they are not actively experimenting with it in their delivery of services that they should be.

Yeah, it’s get on the bandwagon. This thing’s happening quick. It’s changing daily. It’s a fantastic, exciting time to be involved in business and seeing this change is just phenomenal. But you can’t afford to not explore and experiment with it.

Yeah, and it’s one of those things that everybody in the organization needs to be using. So not just a few people or not just the most lower level people, but everyone in the organization needs to be actively experimenting. And it’s kind of mind -blowing some of the case examples that I’ve seen of market research firms, again, automating 50 to 60 % of the market research work that they do law firms automating discovery, IT services firms automating writing code. The list just goes on and on. And it’s significant. If you can learn how to use these well, obviously where you’re protecting the data and you’ve got good quality assurance in place, the type of transformational change that it can bring to your work.

And into profit.

Correct. Yes.

And thus valuation because ultimately why are we here having this conversation? Because we’re exploring how will productization help your business be more attractive to being acquired? And the bottom line is if your business, the less your business is dependent on key people, the lower the risk it is in changing hands and continuing on with its current profitability, which by lowering the risk makes it more valuable and more reliable.

You’re also producing a more reliable outcome for your client because you’re removing any variability of the human factor. So how do we wrap this up? We’ve learned that unpacking someone’s head is not impossible. We need to get that process out of all the things that they think they do intuitively and creatively is just a case of digging in and starting to think like a product or a manufacturer would. I like that analogy and getting creative around. The other big thing is doing the research of what you think may be a or a solution that requires solving for lots of clients. Just do your market research first to see if it is actually a demand in the marketplace for a productized or automated solution. We’ve pulled together and covered a whole lot of stuff, but what if you were to wrap this up? What’s the summary? What’s the big message you would like listeners to take away from our conversation?

Yeah, I would say just get started. And get started not by investing six, seven figures in developing a product, but get started by mocking up, even in PowerPoint, just what a prototype might look like, what the features might be, how you might price it, and then test it. Get feedback from customers. And if as you start to get market feedback, then you’re onto something, then you can start to invest in the development of the idea. But definitely embracing this kind of test and learn ethos is very important to successful productization.

And start asking your clients, what do they really value? What problems do they want solved? And how can you, with your experience and expertise, help them? Brilliant. Now, Eisha, I know that you’ve been doing this for a number of years and you’ve written a couple of books on the topic. If someone wants to find out more and dig into it and go, tell me a bit more about this, Eisha’s really opened a can of worms or some thought for me. How do they follow up? What’s the best way for them to find out more?

Yeah, so I’ll give you a link where they can get a free download of my book, Product Highs, that overviews what we call the seven deadly sins of productization and how to overcome them. So that’s something that your listeners can download for free. also on LinkedIn. If anyone wants to connect with me, just mention you heard me in the podcast. And then our website is www.vecteris.com.

And we’ll put that in the show notes so that you don’t have to remember that. You can just click straight through. If you go through to the show notes on our webpage, we’ll find that including the download for a free copy of Productize. And look, since we’re on it, I think you’re about to, you haven’t stopped your thinking at productize, have you? I imagine there’s something else in the works or am I speaking out of tune here?

No, you’re right, Darryl. So I have a new book, Commercialize. You can see a theme here, right, and how I title books. And it’s all about how do you successfully package, price, market, and sell productized services? Because that can be a significant stall point for organizations. And it requires different go -to -market motions than marketing and selling services.

So keep your eyes out for that one. Eisha Armstrong, thank you so much for sharing your exit insights with us today on how to productize your proposition.

It’s my pleasure, Daryl. Thanks for having me.

Excellent.

About Eisha

Eisha Armstrong is the Executive Chairman and Co-Founder of Vecteris, where she works with B2B services companies to productize their offerings.

She has more than 25 years of product management and product leadership experience in the data and information services industries.

Eisha earned her MBA at the Harvard Business School and her Bachelor of Arts at the University of Kansas and she is also a certified yoga teacher, has climbed Mt Kilimanjaro, and loves to hike, bike, kayak and ski.

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