Productization (Again)
Blair changes his mind on productized services. Again. And AI is the reason.
Links
"The New Age of Consulting" by Blair Enns for winwithoutpitching.com
Transcript
Again. I'd rather title it Blair's Apology Tour Version 3.
Blair Enns: I'm not apologizing for all of my past mistakes. I think that was all part of the journey of where-- I wouldn't be where I am today if I did not follow that path.
David: Yes, you'd be a lot further ahead. [laughs]
Blair: In my defense, we'll get into this. I have made some-- mistakes might be a little bit strong. Yes. No, okay. I've made some mistakes on this idea of productizing your services. Then there are also situations in which times have changed. I think we're in one of those times now where times have changed. I am changing my mind yet again on the subject of productization, should you productize your services?
David: Essentially, you're saying, no, or be careful about it. It's not the wholesale endorsement that you made back in, what, a year ago?
Blair: May of 2025, one year ago, yes.
David: I think this is wrong too, just honestly. This is the penultimate episode. Come around a year from now, you'll come right back to this. Frankly, what I'd like is a little bit less customization of your productization ideas. "Oh, I'm so proud of them. I'm so proud of that phrase."
Blair: You worked on that all weekend, didn't you?
David: I did. I'd have it written down too. Okay, so take us back. Let's get through the phases first. January 2018, what happened here?
Blair: I released Pricing Creativity, now out of print. In that book, I strongly suggest that you should resist the urge to productize your services.
David: Is that why it's out of print?
Blair: Among other things. [laughter] That book has made a lot of people a lot of money, including me. It's jam-packed with valuable advice, but it does need updating, and that's why I pulled it.
David: Okay, so that was January 2018. Fast forward six years to December 2024.
Blair: Do you want me to talk about why I had that position in 2018, though?
David: No, I just want to lay out the facts before we call the jury in.
[laughter]
Blair: Okay, yes. January of 2018, I say, yes, you should resist the urge to productize. Then December 2024, I publish The Four Conversations, and I say productization is just fine, so is customized services still just fine. Just be aware of the trade-offs. I had this two-by-two on standardized versus customized across the two different dimensions of your delivery and your pricing. In the delivery domain, standardized services would be productized, and then customized would be, well, really, it's a form of consulting. That's December of 2024.
David: Right. On this pros and cons theme, let's just remind people, one of the main cons of productizing your services is around what happens to pricing when you productize your services, right?
Blair: Doesn't have to be. You can productize your services, and then you still have the decision of are you going to price the services, or are you going to price the client? If you decide to productize services where you're pricing the client, and I forget where I got this, and we talked about it in the last episode we did on productization, I think it may have been Greg Alexander from Collective 54, the most lucrative business model for professional firms seems to be this combination of productized services and then customized prices, where you continue to price the client, and therefore it value prices your productized services.
David: Okay. January 2019, Pricing Creativity, stay away from productization. December 2024, when The Four Conversations book came out, you were a little bit more open to it and just wanted people to think about the pros and cons of each. Then May 2025-
Blair: You notice that these timeframes are getting closer and closer. Six months later, I publish a post saying, you should probably productize. The impetus for this was the pressure that AI is putting on productivity and therefore labor-based pricing models. You're selling time. You're getting more productive. You can do things faster and faster. You're effectively making less money if you are charging by the hour or the sprint or the FTE.
David: That's May 2025. You called for rethinking, maybe some productization because of how AI is killing labor-based pricing. Then April 2026, so up to the current, where are you now on this?
Blair: Where I am now is it is so clear to me, and there are a few different sources and we can dig into it. We are in a time of transition with AI, right? Everybody would agree with that. The tools are changing everything. Now, because AI lets us spin up products like that, instantly, "Just check your inbox to validate this," we are drowning in pitches for all kinds of AI-generated products, most of which are designed to help us use AI to be more productive, but it's so easy to create a product. Therefore, everybody's creating products exactly at a time when your clients want customized help.
This is 2005-ish, Web 2.0. You remember, you and I have, for the last few years that this value proposition of digital transformation, it's over, and there were too many historically web firms who got into the digital transformation business were clinging onto that message long past its relevancy. I think you and I would both agree, and correct me if you don't agree, that there was this period of roughly 15 years, from roughly 2005 to roughly 2020, just before we went into COVID, when there was a lot of money to be made in helping analog businesses get up to speed in the new digital economy.
Maybe the last five years of it were a little bit sketchy, but certainly from 2005 to 2015, there were a lot of really good firms out there that got to be quite sizable that were this blend of design, software engineering, and consulting. They were working with the largest companies in the world to help transform their business into the digital economy. They started to compete with the pure consulting firms. The consulting firms started to buy them. There was lots of money being made by lots of different parties.
Part of the Venn diagram of the three services that overlapped, design, software engineering, and consulting, we did see some people from some consulting companies come into the space. I'm thinking of some clients that come to mind right now. The playbook was a consulting playbook. You went into your client's organization and you took the time to learn their business, to figure it out, and figure out exactly what they needed to do to transform their business into this new economy.
All that money that was made from that digital transformation value proposition, it was made in largely customized services that we can loosely call consulting. Now we're in this very similar period of transition where all of these businesses need to adapt to the new reality of AI. The last thing they want to do is they want to buy a product. What they really want is to work with a consulting company to help them leverage these new tools and get to this new AI-first mindset and business.
David: I have a question about this. It's not a pushback, it's a genuine question because it feels like we're missing something here, in the sense that, if you think of a Fortune 5000 company, and they have a marketing department in-house, and they're working with agencies and so on, that in-house department might consult with the agencies about how to use AI in their marketing efforts and so on.
The rest of the company isn't going to talk with this agency. What I'm asking is, do you think there's a difference between the AI revolution and the digital revolution? Because these big Fortune 5000s are going to be working with huge consulting firms right out of the gate about how they can go AI-first. Agencies are just going to be asked about how to bring AI to marketing. Whereas in the past, they were asked about how to bring digital to more things than just marketing in the digital revolution.
Blair: No, I think it's exactly the same thing. I think at the very high end of the market, the largest companies, you're largely going to see the large consulting companies going in and doing the big enterprise-wide AI stuff. I think that's going to be hard to do. I think the independent agencies, in particular, with smaller clients, they're going to have all kinds of opportunities to go well beyond marketing into the C-suite. I'm seeing this happen with all kinds of firms right now. The stories that I'm getting back in just the last two or three weeks, it's basically, as I think I said to you in a text about a week ago, it's a gold rush right now. There are so many different firms doing this, but there's so much need.
Maybe think of it as the capacity that was sitting there in independent agency land with all these digital transformation businesses petering out wondering where do they go next. Some of these firms have just been re-inspired, and not just inspired, reinvigorated, and their results have been reinvigorated from them going back in, dusting off a playbook that was relevant just a few years ago. They're wondering where to go next. They still have a lot of the same people. They still have the mindset. They still have the playbook memorized. They're technology-first businesses, or at least highly technology-curious and capable businesses.
They're small and nimble. They're creative. They're at the front end of thinking of working through how do you use these tools. It really is now as simple as if you have a relationship where you can get in front of a business and you can simply show them what you did for another client, or even a product, and we'll come back to this, a product that you've built, there are just minds being blown every day by these firms sharing with their clients stuff that they've done for others. I just hear story after story of, I think I said to you in a text, selling right now, if you're in this space, is as simple as demoing, just saying, "Here's what we built for somebody else."
Then you even get-- and I'm hearing stories of large companies, sophisticated buyers looking at this stuff that was spun up pretty easily for another client and looking at it going, "We want that. How much for that?" I don't know how long this window will last. I imagine it's going to be three years. Maybe it's going to be as much as five years, maybe even a little bit longer, but it feels to me like the early days of digital transformation, again, and the playbook is consulting.
There's so much uncertainty. We're still in the early days of all of this. The client doesn't want to buy a product. They want somebody who knows what they're doing to come in and tell them what they need to do in their own business. Now, I'll plant the seed. We'll come back to it. In that moment, there is room for these products that you've built and applying them and customizing them. The big mistake would be to say, "Well, we built this product for so-and-so. Let's launch this. Let's spam our TAM and go to the market with a message of, 'Hey, buy our product." I think of it as product-enabled consulting. Like tech-enabled services, it's product-enabled consulting. I think that is the model, and the money is in the consulting.
David: I hope you're right. I hope you're right. I don't feel the same way.
Blair: I think you can hear from the tone of my voice that I'm pretty confident that I'm right. I'm hearing in your voice that you're not as confident as I am.
David: I'm not.
Blair: Why is that?
David: For one thing, I felt like the digital transformation play was a temporary one. It lasted longer than I thought it would, for sure. What made me sad about it is that all of these firms that jumped on that felt like it was a positioning. It's like, "Oh, we do digital transformation." Yes, you do, but so do thousands of other firms. To me, that's what's going to happen with this AI. It's going to put off the hard decisions that firms need to make around positioning.
I think positioning is going to be more important in the future than it is now. I think doing what you described for AI is going to be absolutely fantastic, lots of money, lots of impact. I think of it as a service offering that's attached to a positioning. What discourages me is the movement which I see out there, not everywhere, but most places, is people jumping on this and assuming that this is the new gold rush. We just all need to go to California with something to put in rivers and find gold. I think that part of it's only going to last a year and a half or so. Then they're going to be struck with, "Oh my God, look at all this competition out here."
Blair: I think the fool's gold gold rush, which I'll just use that term to describe what you just talked about, I don't think it's going to last at all, is in selling AI products, because you made a product, do you think you're going to spin it up and sell it to everybody else? It's just too easy for everybody to roll their own. You're competing against everybody else who's selling products, and clients don't want products right now.
Then the period that we've already been through that I think is largely going away is these AI products that were really just thin UI and prompt engineering vehicles layered over a model, and then they got featurized by the model. I think we're already through that. I think there's a lot of people falling in love with their AI products, trying to spin up a product company. I would not want to be in a product company business right now. Just like I wouldn't want to be in SaaS unless I was Mark Benioff or one of the huge enterprise SaaS businesses.
I wouldn't want to be in a SaaS trying to sell software to a business like yours and mine. We're busy building our own customized versions of these software, and we're slowly doing away with all of them. I think it's conceivable that by the end of this year, we don't have a CRM. I think it's just going to be a snowflake database and an agent.
David: If you think about what's the role of consulting for, just picking a number out of the air, a 15-person agency working with a $100 million client, they're obviously going to infuse AI into their own work for that client. I think there's going to be a big market where they help that marketing department infuse AI in an AI-first or an AI-forward sort of a mode.
I just wonder if that $100 million client's actually going to let them do their new version of digital transformation across the whole enterprise. That's what I don't see happening. Truth is, I don't really know what's going to happen. I'm skeptical because of the actual argument that agencies are making, but I'm also skeptical just because everybody thinks it's true.
Blair: Yes. I think that's a healthy skepticism, too. If I could go back to your point about positioning, I think maybe you and I agree that there's a whole bunch of money to be made right now. I think the positioning problem, it's not a today problem, but you should be thinking about it today. If I were one of these firms and I were going to market with this AI transformation value proposition, I wouldn't even include the letters AI. I think that's a mistake. I think that's leaning too much on the tool.
If you think of, what do these things have in common? What did the digital transformation era and the AI transformation era, if that's what we're calling it, what do they have in common? It's this combination of creativity and technology and consulting. Again, that Venn diagram of the three things overlapping. I think that's a valuable space maybe forever. How do you position that? I think it's a type of consulting company. You and I have talked around this subject before. I think it's some sort of creative consulting or creative technology consulting that there's a label that has more legs than something that risks looking like a fad in 24 months.
I think if your firm was in the digital transformation space and you've been revived in the AI transformation era, you should think about what's coming after. Not that any of us are going to make good predictions about what's coming next, but I think the way in which you frame your offering, it has to be that you do not lean on your tools. Don't go too heavily into AI. Think at a higher level about the nature of the problems that you're solving and where you fit in relative to the IBMs of the world, the Accentures of the world, et cetera. I think there is an advantage there with the creative element, the creative aspect of it that allows these types of firms to compete with the big boys over the long term.
David: I think the mistake would be to slap a label on it that's going to be obsolete in 24 to 36 months.
Blair: You know what's also fascinating about all of this movement? Then I want to summarize what I think you're saying to see if you agree with it. One of the things that's pretty fascinating about this is that, for once, the young folks entering don't necessarily have an advantage. The only advantage they have is that they're starting from ground zero. They're reimagining things as if this is a new industry.
It's the people in their 40s and 50s in the agency world that are really experimenting the most and leading the charge here, which is pretty nice. Finally, it's just like, when you're a little bit older, you have an advantage, which hasn't necessarily been the case. Let me see if I can summarize. You're saying, fast forwarding in your view on this, is that there's such chaos in the client world right now that customizing is really the way you have to go until some of the fog lifts anyway. Would that be a fair statement?
David: Yes.
Blair: When the fog has lifted and everybody's got a lay of the land and everybody's reoriented to this new world, you want those consulting clients to be using your products, but if you go in selling products, your value proposition is not going to align with the client's need. They need help. They need-- I'm going to keep using the word consulting, even though that's a big suitcase word. They need consulting.
In the execution, when you're helping your clients, you are going to develop products for them. Some of those products you'll implement in a slightly different way because it's so easy to customize products now. You'll have these standard products and you will customize them to your different clients, and maybe there's some sort of lock-in or subscription revenue at some point down the road once the consulting revenue starts to ramp down, and you've got some ongoing relationships where your clients are using your products that probably have some degree of customization.
There is a role for products. Products are, again, because it's so easy to make products, you'll be making lots of products and installing them in your clients' businesses. Down the road, I think when we're through this window of opportunity, it's those firms that have an install base of some sort of products [unintelligible 00:20:38] that are going to have the best longevity with the clients that they're landing today.
David: I just gave a talk last week, and my last sentence was, "It's a great time to be alive."
Blair: Isn't it?
David: I really believe that, yes. It's just so much fun. I recognize that there's creative destruction, and half of that phrase is destruction, but it's still a really exciting time to be alive. To me, way more exciting than the whole digital stuff that happened 25 years ago.
Blair: In hindsight, doesn't it look like we wasted maybe not 10 years, but we wasted a bunch of time. When I say we, maybe the broader business world, we were a little bit too focused on SaaS for a little bit too long. I can't quantify this, but I'm pretty sure SaaS drove the economy quite a bit. I don't know if you remember when we were in 2021, so we're a year into COVID, maybe it was Rand Fishkin, maybe it was somebody else who said, basically, going into COVID, we were in a software recession.
They had the numbers to prove it, and I've since lost them, but that whole zero interest rate environment that funded the entire venture capital ecosystem, which funded SaaS, that was already drying up. Then COVID hit, interest rates go up, the VC ecosystem basically dissolves. Everybody wakes up and goes, "I have all these seats in all these different products that haven't innovated in forever, subscriptions."
Again, I think it was Fishkin. He was saying, we were going into software recession. Then all the COVID money kind of propped SaaS up, propped everybody up. Then we started coming out of it. Look at the pace of innovation right now. In hindsight, there has not been a lot of innovation, pre-transformer model AI. What the hell were we doing for the last 10 years? This feels like the world we should be living in with everything is exciting and moving fast and everything is changing.
David: To your point, I absolutely love it. Yes. I would just say that adding feature bloat is not the same as innovation. Zoom, cough.
[laughs]
David: Referencing the conversation we had before we hit record.
Blair: Yes.
David: Thanks, David. I really enjoyed this conversation. I like that we're not perfectly aligned on it. I think it's a good fruitful conversation. We'll see how it plays out.
Blair: We'll see you in a year from now, audience. I think it's going to be four months we'll come back. Thanks.
David: Thanks, Blair.