Thinking strategically about products and services

19/5/2025 ☼ product ☼ service ☼ strategy ☼ uncertainty

I’ve been working with two teams at a global economic development agency to clarify and strengthen their offering strategy.

One of the most consequential strategic choices an organisation makes is whether it should focus on delivering products or services. This decision shapes how it hires and allocates resources, how scalable it can hope to be, and where it chooses to compete.

This essay lays out a way to think more clearly about the difference between products and services, and the strategic implications of choosing to offer products vs services.

The product/service distinction

“Product thinking” is currently fashionable. It focuses organisational attention on end-user needs, but also carries a subtle bias. Product thinking and productisation imply that every offering from an organisation should be a product. This framing matters. It nudges organisations toward building products even when services might better serve strategic goals.

I’m going to use definitions for “products” and “services” that are different from how those words are often used colloquially, to be able to lay out the strategic logic more clearly and concisely.

Services are delivered by humans and are characterised by:

• The need for judgment and discretion in delivery,
• Responsiveness to emerging client needs,
• Discovery through real-time interaction,
• Customization as understanding deepens,
• Relationship-centered interactions with users.

Examples: Management consulting, personalized financial planning. The value in a service comes from how human service providers can adapt their offerings, evolving what they deliver as they learn about their clients’ situations.

Products, on the other hand, are units of intellectual property characterised by:

• A relatively stable, fixed form,
• Easy replicability with minimal customisation,
• Easy scalability without needing many humans for delivery,
• Transaction-based, not relationship-based, interactions with users.

Examples: Software products and standardized reports. The value of a product lies in its consistency, reliability, and low marginal cost to serve more users.

In real life, nearly every service uses products (e.g., a coaching session that uses standard worksheets to deliver a tailored development programme) and many products require some after-sales customisation (e.g., accounting software that needs to be set up with your business profile) — the point of making the conceptual distinction between products and services is to be able to articulate clearly when to choose to offer services and when to choose to offer products.

When to offer services vs. products

This seems to be a delivery question, but it’s actually a strategic one. The answer depends on your diagnosis of the situation.

Flexible, adaptive services are especially appropriate when:

1. Client needs are still forming.
2. The operating environment is rapidly changing.
3. The problems to be solved are wicked, complex, messy problems.
4. The stakes are high.

Standardised, pre-packaged products make sense when:

1. Needs are known and stable.
2. Delivering at scale is important.
3. Consistency is desirable/required.

Few organizations make a clear strategic choice about whether to focus on product or service offerings based on these principles. Without this clarity, misalignment often results.

Misalignment signals

Signs that you’re building product where a service would be more appropriate:

1. Your product doesn’t work for the client without spending a lot of time explaining it and configuring it to the client’s particular context.
2. You keep having to add edge-case features to the product to make it useful for clients.
3. Clients say the solution doesn’t fit their context.

Signs that you’re building a service where a product would be more appropriate:

1. You end up doing the same work over and over, but for different clients.
2. Clients begin to complain about paying custom rates for what seems to be standardised work.
3. Your best people get bored doing repetitive tasks and start to lose motivation.

New trends and deep history

Fads and organisational history obstruct clear strategic thinking about products and services.

The trend for “product thinking” (which started in the private sector and has now extended into the public sector) drives organisations to develop products even when services might be more strategically appropriate.

At the same time, organisations that became successful providing services (e.g., strategy consulting companies and development agencies) have history and culture that drive them to offer services even when those services are routine enough that they’re better crystallised into products.

The survival imperative

This isn’t semantics. Products and services are different ways of creating value — and they require different capabilities, metrics, and organisational investment. As your context evolves, so should your offering mix.

Defaulting to past practice or current fashion when choosing whether to offer products or services leads to misalignment, wasted effort, and missed opportunities. The best route to long-term success is to choose strategically based on a clear diagnosis about what your context needs and how your organisation wants to deliver it.

When teams can make (and remake) this choice in a clear, reasoned way, they give their organizations a powerful edge in surviving and thriving in increasingly resource-constrained and uncertain environments.

If your organisation is thinking about its offerings strategy and would like some help, I offer facilitated sessions to guide leadership teams through the process. Drop me a line and we can have a chat about it.

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I’ve been working on tools for learning how to turn discomfort into something productive. idk is the first of these tools.

And I’ve spent the last 15 years investigating how organisations can design themselves to be good at working in uncertainty by clearly distinguishing it from risk.