service productization the next wave in services innovation · project management. service...
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October 25, 2012 Presented by:
Jeanne Urich Steve Bittner Managing Director VP of PS SPI Research Unanet
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Service Performance Insight Accelerate Service Productivity & Profit
Copyright © 2012 Service Performance Insight, LLC All Rights Reserved. Not for Distribution.
Service Productization
The Next Wave in
Services Innovation
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Service Productization
Why?
What is a Productized Service?
Benefits?
How to Productize Services
Service Product Examples
Benchmark results
Lessons Learned
Unanet case study
2
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WHY PRODUCTIZE SERVICES?
Service Productization: The Next Wave of Innovation
3
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Changing Industry Dynamics Intensify PS Pressure
4
Sophisticated
Procurement
Practices
Increased Project
Complexity
Rapidly Changing
Technology
Environment
Global
Competition
PSO
Revenue
& Profit
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PSOs Experience Pressure from Many Constituents
Finance &
Operations
Directives
Career Path, Work / Life
Balance
PS Resource
Requirements
Sales and
Client
Demands
PSO
Revenue
& Profit
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Clients Demand More!
“Value” is the new favorite word
of client execs
Shorter, faster projects
PS firms response: productize
service portfolios
Done right, productized services
can open up exciting new
revenue and profit streams
6
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Market Challenges Driving Service Productizing
7
Challenge Survey
Average
Embedded
PSO PSO
Service Differentiation and Improve Sales Effectiveness 4.29 4.13 4.43
Pressure to Accelerate Project Time to Value 3.83 3.89 3.77
Market and Service Portfolio expansion 3.66 3.41 3.87
Drive Innovation 3.53 3.37 3.67
Client Demand For More Tangible Service Offers 3.27 3.15 3.38
Commoditization of Your Services 3.00 2.76 3.20
Pressure to Provide Packaged Cloud Services 2.31 2.41 2.22
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WHAT IS A PRODUCTIZED SERVICE?
8
Service Productization: The Next Wave of Innovation
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By Definition…
9
service productization [noun]
the process of delineating, building, deploying, and enhancing a
clearly defined service process to achieve operational
improvements in support of an organization’s strategic
objectives
service lifecycle management [noun]
the process of managing the entire lifecycle of a portfolio of
service products from conception, through definition and
development, to enhancement and retirement
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Productized Services Defined
A pre-defined and clear offering
or deliverable
Consistent knowledge and
skills required to deliver the
service
Uses a consistent standard
methodology
Supporting tools and templates
Quantifiable costs and
demonstrable value
10
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BENEFITS OF SERVICE PRODUCTIZING
11
Service Productization: The Next Wave of Innovation
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Why Productize?
Clearly defines client “pain”,
business value and deliverables
Makes services more tangible
Tight scope/assumptions - easier
to create estimates and proposals
Improves consistency,
repeatability and quality
Reduces delivery cost, time and
risk
Ability to use less-experienced
resources
Improves revenue recognition
12
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Desired Results from Packaged Service Offerings
13
Desired Result Survey Embedded
PSO PSO
Easier to sell, position and expand service revenue with a
complete service portfolio 4.49 4.56 4.44
Clients understand business value – shortened sales cycle 4.33 4.41 4.25
Improved revenue and profit from predictable costs, resources,
time and deliverables 4.10 4.09 4.11
Improved ability to propose, estimate and manage fixed/time price
bids 3.92 3.96 3.89
More projects delivered on-time, on-budget with reduced risk and
improved consistency 3.83 4.04 3.65
Enhanced intellectual property value around methods, tools, and
processes 3.58 3.22 3.89
Ability to sell into new markets 3.51 3.43 3.57
Clear policies, roles, blueprints, templates and tools accelerate
new-hire ramping 3.23 3.42 3.07
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HOW TO PRODUCTIZE SERVICES
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Service Productization: The Next Wave of Innovation
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SERVICES STRATEGY
PORTFOLIO MANAGEMENT
CHANGE MANAGEMENT
PROJECT MANAGEMENT
CHANGE MANAGEMENT
PORTFOLIO MANAGEMENT
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SLM3™ METHODOLOGY
SLM3™ - SPI’s Proven Methodology
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SLM3™ Roadmap
INNOVATE DEFINE DEVELOP LAUNCH OPTIMIZE PHASES
ACTIVITIES
PORTFOLIO MANAGEMENT
CHANGE MANAGEMENT FOUNDATION
Approve Launch
Develop Training
Materials
Close
Development
Project
Conduct Market
Validation & QA Propose Service
Product
Approve Service
Product Definition
Track Feedback &
Results
Plan for Next
Release
Perform Service
Product Strategic
Planning
Create Internal Launch Plan
Develop Marketing
Materials
Launch Service
Offering
Evaluate Market Reaction
Assess Service
Product Alignment
Create Service
Specification
Establish
Go-to-Market Plan Conduct Training
Analyze Marketing
Performance
Request Service
Product
Create Project
Plan
Develop Service
Product Conduct Pilot
Program
Analyze Field
Performance
PROJECT MANAGEMENT
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SERVICE PRODUCT EXAMPLES
17
Service Productization: The Next Wave of Innovation
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Industries
Automotive
Consumer Goods
Financial Services
Life Sciences
Service Product Portfolio Example
Service Lines
ERP
Human Capital
Management
Product Lifecycle
Management
Business
Intelligence
Service Offerings
Business Strategy
Operational
Excellence
PLM Solutions
Technical Services
Analytics
Service Products
Big ROI
Implementation
90-Day PLM Quick
Start
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Achieve Breakthrough Results in 90 Days!
Our 90-Day PLM Quick Start delivers speed to production
Get Ready
Get Set Go!
Rapid implementation methodology
Training sessions and hands-on workshops included
Proven approach with over 150 delighted clients
ADOPTION
Usability – ease of use incorporated in approach
Stakeholder involvement accelerates adoption
Rapid transfer of ownership to business drives ROI
ROI
SPEED
QUALITY
Best practices embedded in solution
Includes easy to use best practice guides
Flexible, user-defined processes support future
changes
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Best Practice Productized Service “Packaging”
Contents
Instructions
Delivery Guides
Tools
Templates
Practices, methods,
processes
Links to supporting systems
FAQs
Best practice examples
Requirements
Content for each service
product reinforces
engagement framework
Easy to navigate
Easy to consume
20
What does a productized service look like to a delivery
professional?
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SERVICE LIFECYCLE MANAGEMENT
MATURITY MODEL™ BENCHMARK RESULTS
21
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Leadership
Client
Relationships
Human Capital
Alignment
Service
Execution
Finance
& Operations
No service
portfolio plan or
investment
No plan, budget,
systems or
metrics
Manual
Inconsistent
Tactical
Reactive
Instinctive
Jack of all trades
Heroic
Ad Hoc
Opportunistic
Service portfolio
strategy & plan
emerges
Campaign-driven
point solutions
Borrowed
rotational
resources
Standard
methodology &
tools
Budget, metrics,
controls
introduced
Piloted
Pockets of
excellence
Strategic service
portfolio plan
Exec sponsorship
Programmatic,
comprehensive
solutions
Dedicated, skilled
service portfolio
team
Global, consistent
methods, tools,
standards
Automated
budget, metrics,
controls
Deployed
Basics in place
for all key
elements
Service portfolio
management
operationalized
Strategic, global
brand,
quantified value
Strategic
Visionary
Automated
service lifecycle
management
Streamlined
Real-time
Self-service
Institutionalized
In organization’s
DNA
Service portfolio
drives market
expansion
Industry-leading,
innovative,
trusted advisors
Thought-leading
portfolio
management
Advanced service
lifecycle systems,
tools
Real-time
analysis & insight
Optimized
Visionary, agile,
innovative with
continuous
improvement
Maturity
Service Lifecycle Management Maturity
Retu
rn o
n In
vestm
en
t
Level 1
Level 2
Level 3
Level 4
Level 5
Service Lifecycle Management Maturity Model™
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Level 1
Initiated
Heroic
60%
Ad-hoc,
Opportunistic
Level 2
Piloted
Functional
Excellence
15%
Experimental,
Pilot Stages
Level 3
Deployed
Project
Excellence
10%
Basics in
Place for all
Key Elements
Level 4
Institutionalized
Portfolio
Excellence
10%
In Company’s
DNA /
Fabric
Level 5
Optimized
Collaborative
5%
Visionary,
Agile
Innovative,
Continuous
Renewal &
Improvement
102 PSOs – 46 Embedded, 56 Independent
415 PS employees with $83M in PS revenues
Service Productization Maturity
23
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Service Lifecycle Management - Maturity Matters!
Service Packaging Focus
Level 1
Initiated
Level 2
Piloted
Level 3
Deployed
Level 4
Institution
Level 5
Optimized
58 15 11 11 7
Initiation of Service Portfolio packaging (years) 2.4 4 3 3.2 4.6
% service revenue from productized services 21% 33% 22% 45% 61%
# of new services launched in the past year 2 4 3 3 5
Months from idea to service launch 10 13 7 6 6
FTEs performing Service Packaging 1.7 4 3 3.5 8
A defined service packaging process and
discipline exists (1 to 5 scale) 2.3 2.7 3 3.6 4.5
% of "reference-able" clients 69% 70% 74% 88% 88%
% of revenue from New Clients 27% 31% 33% 37% 41%
24
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Service Lifecycle Management - Maturity Matters!
Service Execution
Level 1
Initiated
Level 2
Piloted
Level 3
Deployed
Level 4
Institution
Level 5
Optimized
58 15 11 11 7
Project Management Methodology 2.7 2.5 2.8 3.6 3.6
Service Productizing Methodology 1.8 1.7 2.4 2.9 4.2
Knowledge Management Processes,
Systems 2.1 1.8 2.2 2.4 3
Service Product Training & Roll-out 1.3 1.3 1.8 2.1 2.8
Quality Management 1.9 1.7 2 2.5 3.4
Average Project Duration (Man-Months) 3.7 7 9.7 11 14
Projects Delivered On-Time 67% 77% 83% 86% 95%
25
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The Effect of Service Productization Maturity
on Service Delivery Consistency
Initiated
Level 1
Piloted
Level 2
Deployed
Level 3
Institution
Level 4
Optimized
Level 5
Ad hoc / one-off services 36% 16% 28% 25% 18%
Standard methodology / ad
hoc delivery 30% 41% 40% 20% 19%
Standard methodology /
standard delivery 34% 43% 32% 55% 63%
26
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LESSONS LEARNED AND RECOMMENDATIONS
27
Service Productization: The Next Wave of Innovation
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Service Productization Prerequisites
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Service Productization Failure Points
29
Innovate • Misunderstood or not enough client “pain”
• No market sizing or business case
• No competitive differentiation
• No overall plan or portfolio – Service Product “One-offs”
Define • No business plan and/or executive support
• Unrealistic expectations – both revenue and cost
• No committed resources
• No Service Productizing blueprints, methods, tools or competency
Develop • Without committed resources, service productizing takes too long, costs too much
• No repeatable methods, tools, IP or plan for re-use
• Not enough field feedback around “use cases”
Launch • No Sales, Marketing or Launch plan – no internal buy-in
• Not enough time or resources committed to training
• No Beta or reference customers
Optimize • No method for capturing client and field feedback
• No methods or tools for improvement
• Poor field and client reception – missed revenue commitments
• No metrics or measurements tied to compensation
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Service Lifecycle Management - Maturity Matters!
Show me the money!
Level 1
Initiated
Level 2
Piloted
Level 3
Deployed
Level 4
Institution
Level 5
Optimized
58 15 11 11 7
Total Professional Services Revenue (M) $66 $74 $158 $17 $226
Service Packaging Spend as a % of Service
Revenue 1.7% 1.6% 2.1% 2.0% 1.5%
Gross Margin from Packaged Services 32.8% 38.7% 36.4% 39.5% 49.3%
Annual Revenue per Billable Consultant (k) $151 $253 $236 $277 $275
Annual Revenue per Employee (k) $122 $188 $198 $239 $254
Average Revenue per Project (k) $139 $142 $199 $306 $189
Percent of Annual Revenue Target Achieved 90% 97% 99% 110% 98%
Percent of Annual Margin Target Achieved 84% 94% 91% 102% 103%
EBITDA % 8.8% 14.7% 16.6% 23.3% 26.1%
30
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SPI’s Point of View …
Industry dynamics are
driving service
productization
Adopting a well-coordinated
service productization
initiative delivers significant
strategic benefits
31
Integrated business applications and a consistent
service lifecycle management framework are
fundamental prerequisites
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Thank you for attending!
Special webinar attendee
$100 discount on the
Service Lifecycle
Management Maturity
Model™ Benchmark
SPI offers a 2 day Service
Lifecycle Management
course!
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Service Productization – How a PSA Tool Can Help
33
Innovate • Misunderstood or not enough client “pain”
• No market sizing or business case
• No competitive differentiation
• No overall plan or portfolio – Service Product “One-offs”
Define • No business plan and/or executive support
• Unrealistic expectations – both revenue and cost
• No committed resources
• No Service Productizing blueprints, methods, tools or competency
Develop • Without committed resources, service productizing takes too long, costs too much
• No repeatable methods, tools, IP or plan for re-use
• Not enough field feedback around “use cases”
Launch • No Sales, Marketing or Launch plan – no internal buy-in
• Not enough time or resources committed to training
• No Beta or reference customers
Optimize • No method for capturing client and field feedback
• No methods or tools for improvement
• Poor field and client reception – missed revenue commitments
• No metrics or measurements tied to compensation
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Service Productization – Analyze Historical Projects
34
Evaluate similar projects for
costs and duration
Actual cost of historical project
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Service Productization – Analyze Historical Projects
35
Evaluate similar projects for
costs and duration
Actual cost of historical project
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Service Productization – Analyze Historical Projects
36
Evaluate similar projects for
costs and duration
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Service Productization – Define Service Product
37
Templatized Delivery Plan for
Service Product
Service Package estimated costs based on historical projects
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Service Productization – Locate Qualified Resources
38
Locate appropriate resources.
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Service Productization – Track Performance
39
Track performance of actual costs… Against Service Package template.
Actual costs versus Service Package estimated costs
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Service Productization - How a PSA Tool Can Help
40
Innovate Benefits of a PSA Tool
Define • Analyze historical data for cost variances, resource needs for
both labor and other direct costs.
• Analyze historical data for variability in project durations.
Develop • Create project templates including WBS elements.
Launch/Execute • Locate optimal resources for project staffing.
• Track actuals against template for ongoing refinement.
Optimize • Adjust service package scope, cost, resources to better serve
market.
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Service Performance Insight®
Accelerate Service
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