Product Companies and Tech Services: Exploring Differences & Key Lessons
By: Damien Kopp
Psychologist Abraham Maslow famously said: “If your only tool is a hammer, then every problem looks like a nail.” While this idea applies to many aspects of life and business, it certainly helps illustrate the difference between product companies and tech services.
I’ve seen both sides of the coin over the course of a 20+ years career: the customization of a services firm, and the development strategy of a product company.
In each case, I felt like a hammer was being used to address something that was much more than a nail!
A far more effective problem-solving approach combines the best of both worlds. It fosters collaborative efforts that build great products with minimal risks and time-to-market.
Since this is easier said than done, I’ve decided to map out the key differences between both organizations. Understanding the disconnect can help you identify opportunities for productive collaboration.
Product vs. Services: The Quick Rundown
From opposite revenue models and go-to-market strategies to differing leadership and governance priorities, both business types have natural friction points.
Just look at how Salesforce (product) and Accenture (services) choose to invest their resources.
Salesforce has operated at median R&D expenses of $4.906 billion from fiscal years ending January 2021 to 2025. In contrast, Accenture’s median R&D expenditure from fiscal years ending August 2020 to 2024 was $1.123 billion.
Both companies have a growth imperative, but their “nail” is different. Salesforce is laser-focused on developing its core CRM technology, while Accenture aims to strengthen client relationships by constantly adapting to their demands.
While this disconnect doesn’t impact either company’s success, there is undeniable value in combining both approaches. My analysis of these system differences has helped me come up with four powerful lessons for businesses looking to compete and thrive.
1. Talent is key
An organization is only as good as its people. This obvious fact is sometimes pushed into the background as businesses shift their focus towards short-term gains. They assume that hiring a few superstars should be enough to turn everything around if problems arise.
However, that is neither realistic nor effective.
Product companies encourage a culture of laser-sharp focus, while services firms embrace a culture of flexibility to adapt to changing client requirements. While both approaches have their merits, there’s simply no substitute for a solid engineering culture that brings the best out of your talent.
Without a supportive environment to foster innovation and creativity, even the best engineers will miss the mark. If anything, they might be at greater risk of burnout, which further dampens their productivity.
Start by hiring serious individuals without any bias towards a specific industry. Diverse backgrounds and technical skills enable a wide variety of ideas to support your short- and long-term goals. Outsourcing is a great way to access different profiles, especially with regions like Southeast Asia growing their technology ecosystems.
Support these brilliant minds with a simple yet effective culture. Encourage free-flowing innovation over micro-management. Trust your builders to make great decisions with the tools at their disposal. Create effective feedback loops between your people and customers/clients to foster empathetic building.
2. Sell benefits, not features
Product companies focus too much on what they build, while services firms are obsessed with what clients want. The truth is that both approaches can work as long as there is a clear benefit to the client/customer.
People want to know how they benefit from a relationship with you.
Many businesses get lost in the details, assuming a list of features will win over decision-makers. But what really drives sales is explaining how a solution helps instead of what it does.
Think about Apple and its “1000 songs in your pocket” claim with the first iPod. It’s hard to imagine customers taking as much of an interest if the company led with hard drive specifications.
Highlighting the benefit of playing an immense number of songs on the go was far more impactful than the features behind it.
So, whether you’re building a B2B SaaS or consulting on IT, ask yourself: what’s in it for the client?
3. Demonstrate expertise
Product companies sell one targeted solution to many customers, while tech services sell many solutions to a few clients. But, regardless of your go-to-market strategy, you’ll struggle to sell without demonstrating credibility.
Think about how businesses trust McKinsey as a consultant or how Amazon dominates cloud computing. These companies have a wealth of proof pointing to their ability to reliably solve customer problems. As a result, prospects find it easier to trust their technology and teams.
Beyond successful projects and products, here are a few ways to show expertise:
- Case studies featuring transformational stories that show how you address issues better than your competitors
- Thought leadership content that speaks to your authority as a knowledgeable expert in the space
- Community engagement in the form of conferences and open-source project contributions
4. Keep innovating
Customer needs are in constant flux. Markets evolve over time. Yet, many companies in products and services overlook this fact.
Product organizations invest heavily upfront in R&D, anticipating future market needs with a solid product before selling it. Meanwhile, services companies close a contract first before delivering a solution aligned with current client requirements.
At MISSION+, we maximize the value of these contrasting strategies through regular innovation. We understand that neither business type can remain relevant or competitive without finding new ways to solve problems.
Innovation can seem like a daunting process. However, the journey from idea to execution can be far less painful than what businesses make it out to be. Instead of thinking about radical new models and technology, start simple.
Prioritize large pools of diverse talent over niche technology. Put feedback loops in place to stay up-to-date on changing client expectations. Invest in automation that frees up valuable time for you to think and build.
Bottom Line
Products and services organizations have different mindsets due to the nature of their work. Product companies require a partner who can customize, deploy, and integrate the product at scale. Services firms need assistance with optimizing their solutions since they can’t re-create them from scratch.
Despite their natural frictions, both business types need to work together. Their disconnect highlights key lessons that companies can leverage to boost employee and client satisfaction.
Have you found it challenging to navigate the differences between product and services organizations? What friction points stood out the most for you?
Who is Damien?
Damien is a Fractional technology leader and innovator at MISSION+. With over 22 years of experience in digital innovation, product strategy, and technology consulting across Europe, North America, and Asia, Damien understands what it takes to drive meaningful change by making the most of technology and talent. Feel free to discuss your innovation strategy with Damien by reaching out at hello@mission.plus.
Originally published at https://www.koncentrik.co/p/friction-to-impact on 8 October 2024.
