Kellogg PM week19: product management for professional service company
They also called this thing robotic process automation, and embedding products.
In previous week, I learned how to resolve conflicts, arrange an effective meeting, and different types of feedback. For me, it is complicated to arrange a bunch of people to work together effectively. I think conflict is always a hard topic for me. These tricks would benefit when you hold it as a framework of thought however without any practice, it is hard to become a good leader. A good type of conflict has way less burden on your emotional feeling while emotional fights always drain your energy.
This week, I learn product management for service organizations, for example consulting companies, law firms, architects, accountants, and financial advisors. Instead of selling a product or building a product to deliver service, they manually deliver service one-by-one for customers. For a more traditional company, they don’t rely much on the supportive tool, and they tend to use an old school way of working. This could reduce their scalability, profitability, and efficiency. If you want to grow, the only way is to hire more people. Unlike tech companies nowadays, they can reach millions of users with a single website.
With productizing services, there are 3 main benefits including scalability, predictability, and marketability. If they have a scalable tool to handle tedious schedules that they need to do manually everyday, we can use their spare time to do something more valuable. With a well engineered tool, you can guess what will happen in terms of delivery which leads to predictability in terms of performance and revenues. Last but not least, the tool could help enhance productivity by making agent’s operation more effective, and if you think of this product not only as a supportive tool you can embed this product as part of offerings too.
Continuum level of productization between the product and service is something you need to consider. A product company can build the product and deliver it by publishing it to the public, then users can get a newer version simultaneously or at least as fast as it could be. Nevertheless, professional service companies have a totally different flow. No matter what you did in your company, in the end, we need humans as a vehicle for value delivery. Assuming there are only 3 levels of combination between product and professional service. First, no product at all, this is a business as usual scenario. Second, full product similar to the product company and no human as front-facing anymore. Third, something in between. For the third alternative, you also need to design whether your product is exposed to customers or not or it is just a supportive tool within the company.
Professor Sawhney elucidates 5 challenges to implement products in professional service firms.
- A product organization or product team inside a professional service company is seen as a cost center.
- A lack of product DNA, and talent. This means their culture and people are shaped toward one specific direction, they might not understand the product team that well.
- Incentives are not aligned between product and service. Lawyers, consultants are paid in hours of their work. This raises an interesting question, how can we bill our customers now if our productivity improves. Does it mean that we need to charge less?
- Investing in product ahead of revenues is a foreign concept in service companies. They can make money by delivering service so they might not truly see a real benefit.
- Even if we have embedded the product with the delivery, it doesn’t directly produce revenues which lead to harder to track the revenue of the product.
Recommendations
- Create a physical space for the product team or at least split them with normal employees
- Establish a different culture
- Hire talent from outside
- Make product teams autonomous
- Give them budgets
- Have a different KPI
- Create a mindset for investing without knowing revenues
- Adopt product management practices including agile, product road mapping, portfolio management etc.
- Agree on performance metrics and how to keep track of these metrics for embedding products.
- Link incentives for product teams to be the same as product teams elsewhere.
Prioritizing product opportunities
You can draw a 2-by-2 metric where x-axis is volume of transactions and y-axis is level of sophistication or effort. A low hanging fruit is where volume is high but sophistication is low. The next territory for us is high volume and high sophistication, in this sense, you can still do automation which still leads to scalability. For the next two are low-volume with high sophistication, and low-volume and low-sophistication.
Automation use cases in different industries
- Mortgage financing: end-to-end underwriting including assessment of risk, document check, supportive decision tool to approve loan or not.
- Wealth management: robo advisor, generate meaningful natural language processing report(report that generate from robot instead of human writing)
- Banking: tracking of stuff, monitoring employees communication.
- Insurance: processing claims, detect fraud, ensure payment integrity
- Recruitment service: resume analytics, recruitment analytics
- Legal service: reviewing contracts, generating legal agreement
- Hospital: patient scheduling service, patient tracking, connecting data across patient, telephonic follow-up, remote monitoring.
Monetization of professional service firm
Professional service firms charge based on hours which professor Sawhney called input-based pricing. Implementation of the product to support employees would eventually increase their productivity and reduce their time spent on a specific task. The goal here is to move away from input-based pricing to transactional-based pricing. The best alternative is outcome-based pricing, we charge from the value we deliver, it steers the direction of the usual professional service firm but we would get the highest value out of it.
Putting products into Services by professor Mohanbir Sawhney
This is a written explanation of the course within HBR. The additional point to make is first, not only the product would scale up the process as you can see in the prioritization section that it could eventually do something complicated to make users life(either end user or consultant within your company) not so burdensome as it used to be. Second, products can incorporate analytics which require absolutely different skillset, embedding smart and tailored stuff for end customers could either increase value or reduce time and friction for something as simple as a dashboard to track recruitment process.
