John Knotts | President and Owner of Crosscutter Enterprises — Your Success Incubator.
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A key part of every business's gross strategy is an integrated product strategy and productization of what the business provides. If you plan to grow your business, you should consider ways to scale and improve operations. Productization is a necessary tactic to discover exceptional success in your business.
What does it mean to productize something?
Investopedia’s definition of “productize” is very broad and does not capture the full extent of why productization is so key to growing your business. It is more than just making something “marketable for sale,” as Investopedia defines.
To grow your business through productization, you are turning something that you sell into something that you can sell at scale – something you can sell a lot of without taxing or breaking your business.
A business can productize any product or service that it sells. Do not be fooled that just because your business produces a product that it is automatically productized. For that matter, productization does not even have to include something a business currently sells. It could be data, intellectual capital, knowledge, etc.
Productization is a process of turning what your company produces, sells and delivers into an easily repeatable effort that normally sells at higher revenues and definitely sells at a higher profit margin. Plus, it can be produced, sold and delivered to a much larger audience than before.
Consider the example of a normal service-based business. Typical service-based businesses trade time for money. Basically, they provide hourly work at an hourly rate.
Productization packages the same hourly work into an easily repeatable deliverable that is of value to the customer for one set price.
What are the benefits of productization?
There are many reasons to productize something for your business. Let me highlight the top three: scale, speed and price.
• Scale. The biggest benefit of productization is how it allows you to scale your business for additional growth without adding more resources. You can produce more, faster, with a higher margin.
• Speed. By establishing repeatability and reproducibility in how you produce, sell and deliver a product or service, you can turn whatever it is you create out faster. In the manufacturing world, this is called increasing throughput. When you operate faster, you can sell more in the same amount of time.
Repeatability and reproducibility are two very important factors in process management and continuous improvement. Often called “R&R,” these two items are very important to the success of your efforts to improve your work. These two items are the ways precision is measured across fields where being exact is very important. Repeatability means that the same person or item will do something the same way every time. Reproducibility means that another person or item that does the same thing will also do it the same way.
When what you do is provided in an efficient and effective manner, that is repeatable and reproducible, you can now look to productize it.
• Price. When you trade hours for money (i.e., hourly rates), the buyer is buying your time. When you productize what you sell, now the buyer is purchasing a valuable solution. They have no idea what it takes (or how long) to make the product. Thus, you can charge more for something you would have delivered at an hourly rate.
What is required to productize something?
Productization is not a step-by-step process. There are a lot of give-and-take and back-and-forth activities that occur as you go through the effort to productize something.
• Identify. The first decision you must make is what to productize that you own, produce, sell and deliver. Sometimes, what to productize is a very clear decision while other times you will want to be more strategic about it. For the strategic approach, list everything your business owns, produces, sells and delivers. Then examine the list for potential opportunities.
• Define. If you plan to productize something, you need to clearly define the end deliverable and understand its ultimate value to the customer. If the customer cannot understand the value of what they are getting, they will want to understand what they are paying for overall. Thus, they will push you into a time-for-money situation.
• Process. To effectively productize something, it must be extremely repeatable and reproducible. Every time you produce, sell and deliver the item, it must follow the exact same steps. This can hamper personalization but is required to work.
• Automate. Much of the effort must work on autopilot, operating at the push of a button. Every single step of the process must be streamlined to eliminate waste. This way, cost and profit are predictable. You want to remove as much human involvement as possible.
In today’s busy and competitive world, growing your business is harder every day. The more you can productize in your business, the more you can sell, the more you can make and the faster you can grow. Businesses that are still trading time for money and delivering customized one-off solutions may continually limit their growth. The logical solution is to productize to grow your business.
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