In a previous article we covered the business case for productization, outlining why service organizations are increasingly turning to product-based offerings to extend their impact, diversify revenue, and reduce dependency on headcount-driven growth.
But recognizing productization as a potential avenue is just the beginning. The bigger challenge is knowing:
- Why: What are the specific strategic & financial drivers that make this the right move for your business?
- Where: Which markets, customer segments, or product types present the best opportunities?
- How: What approach will maximize your chances of success of proving a path, while minimizing risk?
Why Productization? Understanding the Strategic Drivers
Organizations pursue productization or market expansion for a mix of financial and organizational reasons. Before committing resources, leadership teams should clarify which factors are at play in their business:
Bottom-Line Factors
- Maximizing IP – Turning proprietary knowledge, methodologies, or data into scalable assets that generate revenue beyond existing service offerings.
- Increasing Operational Scale – Decoupling revenue growth from human capital growth by embedding expertise in digital tools or platforms.
- Expanding Revenue Predictability – Transitioning from project-based or time-based billing to subscription or licensing models that create recurring revenue.
- De-Risking Growth – Opening new revenue streams that diversify the business beyond current services or segment targets.
Organizational & Leadership Factors
- Leveraging Brand & Culture Strengths – Choosing a path that intelligently builds on existing credibility, market trust, and internal expertise.
- Responding to Board Direction – Leadership teams may be given direction to explore scalable growth opportunities, particularly in private equity-backed firms.
- Aligning Leadership with Aspirations for Growth – Gauging appetite for pursuing new products or markets is crucial before exploring those avenues.
There is a continuum of factors to consider such as the measure of success, risk-reward balance, time to market, share of market, or markets reached. It can be helpful to plot where leadership aligns on these:
With alignment on a clear “why,” leadership teams can move to the next step: determining where to play.
Where to Play: Locating Growth Opportunities
The next move is to look at the business landscape and identify potential plays, in different arenas, that can be compared against the "why" factors above. The Ansoff Matrix provides a structured way and a play field to ideate on different models, and evaluate potential opportunities based on emphases across market and product:
- Market Penetration: Scaling within your current customer base to increase market share.
- Example: A management consultancy develops a digital benchmarking tool to complement advisory services.
- Why it works: Increases revenue per customer while enhancing engagement efficiency.
- Market Development: Entering new customer segments with existing expertise.
- Example: A compliance consulting firm repackages its insights into a subscription-based SME compliance tool.
- Why it works: Expands addressable market without increasing service overhead.
- Product Development: Creating new solutions for existing customers.
- Example: A law firm launches an AI-powered contract review platform for corporate clients.
- Why it works: Adds a recurring revenue stream while reinforcing core expertise.
- Diversification: Developing entirely new product lines in new markets.
- Example: A design agency builds an in-house project management SaaS tool and sells it externally.
- Why it works: Opens a separate, scalable business unit beyond traditional services.
This framework helps define growth opportunity hypotheses—potential paths for growth through market targets, scaling through productization, or both.
Product Development Targets
When it comes to selecting new offering strategies for market segment (new) or funnel stage (existing), here are some examples of some common product targets:
- Existing Customer
- Complementary product
- Top of funnel product
- Long tail product
- New Customer
- Smaller customer
- Lookalike customer
- Adjacent customer
Existing Customer Targets
Complementary Product
A complementary product meets a need for your existing customers, while complimenting your current offering(s). This is often a subscription model, and provides a new channel or experience with which to engage with the current IP your company offers in a different way.
The benefits can include self service, personalization or additional views into elements of the value they are already receiving, given customers greater optionality and control, with a modest increase in cost.
Top of Funnel Product
A top of funnel product meets a need for potential new customers within the same segment (though it may also appeal to new segments). It offers an inexpensive way to engage with an early part of your services expertise, allowing customers to experience a portion of what you provide, with little or no cost (if the goal is expand reach & volume). They can contribute to revenue directly, while expanding the funnel for existing and more expensive offering(s).
Long Tail Product
A long tail product meets an ongoing need of your existing customers, while making your core offering more distinctive. This make it easier for your customers to continue to engage, and reengage with your core offering(s), while also potentially contributing to revenue directly.
New Customer Targets
Smaller Customer
A product and corresponding business model for smaller customers will a meet a need for a broader audience that you are well equipped to address, allowing you to expand down-market. This can be a productized version of your current service(s), typically with a low-touch, yet well designed, digital delivery channel, such as an app or web-based service.
Lookalike Customer
A product for a lookalike customer meets a need for companies like your own, providing a productized version of your expertise in running your own business. This is typically sold as a subscription to competitors or similar businesses, providing them with some benefits of scale, while providing your an anchor for your IP, recurring revenue, and increase competitor intelligence through captured data.
Adjacent Customer
A product strategy for an adjacent customer involves leveraging your existing expertise, IP, or capabilities to develop a new product that serves a customer that similar or analogous to your current segment or industry, but underserved. Rather than just repackaging current offerings (which can take significant resources to grow into a service line), it adapts your knowledge into a scalable product that meets the unique needs of a new audience.
How to Win: De-Risking the Strategy with Rapid Validation
Each of these opportunity areas have their strengths and risks. Winning in new markets or an existing one with a digital product requires ensuring product-market fit before full-scale investment. Accurately identifying market demand, developing & testing value propositions, creating believable but affordable experiments, and increasing product investment as confidence grows depends on a disciplined, low-risk approach to validation.
Validating customer needs as well as product value props is core to what we do. If you’d like to discuss these or other digital product strategies, and hear how Highland helps our clients create recurring revenue and scale, we’d love to hear from you.
