Over the years interacting with tech entrepreneurs at InReach Ventures we have had many discussions in the area of productisation and product packaging. I wanted to try to summarise here some thoughts and I invite founders and funders to add their thoughts and comments as well.
We define productisation as the art of packaging your product. Product packaging is pivotal to entrepreneurs looking for product market fit. During our discussions with founders product discussions are sometimes limited just to the technology layer or feature bundles. However, the productisation effort might include many more dimensions and the objective of this post is to provide a more generic framework for founders and funders to engage in deep discussions.
1 — Product does not mean technology
The same technology layer can be packaged into multiple products because the underlying technology is only one of the components used in a typical productisation process.
2 — Productisation is not only about feature grouping
Sometimes technology leaders and technical product leaders limit productisation efforts to feature grouping. While feature grouping is a typical productisation activity, it is important to realise that productisation is/can be much more than feature grouping. In some cases feature grouping can be the only productisation needed. For example Craft.do and Shapr3D’s current productisation efforts consist of feature grouping towards specific customer profiles/users personas.
3 — Productisation beyond feature grouping
Productisation is the mixing and matching of multiple components that can be packaged in many different ways to define different products. Typical components of a productisation effort are:
- Technology: a technology capability that is the basis and enabler of product features (as mentioned above).
- Feature bundles: a set of features that define the functionality of the technology layer. Often features are grouped together in bundles to satisfy specific use cases and specific pricing plans.
- Customer segment: the customer segment can become the main driver towards a productisation effort. A typical technique in this area is called product verticalisation. A good example of our portfolio company Soldo defining a product for a specific target segment: media agencies.
- Sales channel: even the sales channel can be the main driver towards a productisation effort with or without feature differentiation. In some cases we have seen the exact same product branded with a different name and suddenly it becomes a new package. For example Soldo has built a product for accountants.
- Pricing: is the core of any productisation: it provides a productisation effort with identity. However, not all productisation efforts end up with a listed price and “call me” is a totally acceptable way to deal with large customers or pricing uncertainty due to the early nature of the productisation effort.
- Service: the level of service offered and their relative Service Level Agreements (SLAs) can also be a component to be used in specific packaging scenarios. For example the enterprise package at Contentful strongly relies on a service component as part of the packaging.
- Naming: to come up with a specific name and therefore brand a product can or cannot be part of a productisation effort. At InReach we have, however, observed that the naming and branding effort can help a lot in terms of defining both internal and external communication. It’s much easier to rally an organisation around a name.
4 — Implications and conclusions
The art of product packaging often referred to as productisation is based on a mix of all the above components and is crucially not only about the technology or the feature bundles. Packaging a product for a specific customer segment might give you product-market fit. The same can be said for packaging a product for a specific sales channel that unleashes a previously unprofitable customer acquisition engine.
At the beginning of the company building process it is advisable to have a simple product packaging strategy based on a limited number of product packages. This simplification helps both the general business operations and the sales and marketing efforts.
To push the right product mix is a key strategic decision for all entrepreneurs/CEOs. Not all revenues are equal and at the beginning of the company building process the key is to validate the right product mix that supports the company mission and market positioning. This means that in some cases the entrepreneur/CEO might decide to say no to some product packages because, although they would generate short term revenues, they do not generate strategy validation and ultimately do not contribute to the shareholder value creation process.