What is best? Starting up a product or a service -based startup? It looks like an interesting question but in reality it’s a waste of time.
When you startup a company there is a business idea, an intuition that slowly and hopefully turns into something more consistent: a business model. And a business model is then represented by the best answer an entrepreneur can find to the eternal question “based on which key competitive advantages and market scenarios my company will get paid?”. As you can see, no mention of product or service.
In facts there is no dualism, instead there is very often integration. Very few products and services are used in a vacuum, and a firm is most of the times to be considered mature when is able to think in terms of product-services integrated platforms.
Firms are, by definition, a living organism: therefore they are continuously looking for a balance with the external environment and internally between their various parts. How original this equilibrium can be, it depends on the adopted business model. Another thing firms do sometimes is adopting a mimetic behaviour, which aims to imitate some specific entrepreneurial act of established and/or successful target-organizations. This endless search for balance and imitative behaviour sometimes request a change or an integration on firm’s core domain: transition and diversification. So is most of the times really pointless to say that a service-based model is better than a product-based one or viceversa. That choice will be instead a natural consequence of a well done and deep analysis of your business model and its various potential alternatives.
However, keep in mind that if you stick to your vision, in the end as an entrepreneur you are selling a way to fix someone’s problems and therefore make the world a better place to be: as long as this in going to happen, your customers can’t care less if according to you they are purchasing a product of a service. All that they want is a pleasant solution to experience in order to break free from uncertainty and satisfy some of their needs.
Here some of the question you can better ask yourself, instead of puzzling on product vs service dilemma:
- What is exactly requested by your business model at an early stage?
- Will you start selling a product or a service? Which one will be ready for market in the quickest time? Can they be effectively integrated?
- Which approach, product or services –like, guaranties to the firm a wider and more various number of potential customers? How can they best be locked –in? (f.i.Microsoft, Apple business model)
- Is the product or service approach the most efficient one in order to raise entry barriers against your potential competitors?
- What about the profit margins? What’s best for your firm?
- Is product or service what makes you unique? In other words, what of the two things really represents the most valuable side of your business model in terms of related competitive advantages
- What are exactly the setup costs in both cases?
- Which approach offers the best chances of scaling up?
- Can you think of a minimum viable product or instead a m.v. service?
- What exactly happens all around your customer before, during and after the adoption of your product or service? Is product or service standing at the centre of this cluster of processes and events?
- What kind of product and services (f.i. pre and post sales assistance, training and consulting services, etc) can be complemetary and/or integrated with yours?
- Is product or service the characteristic of your firm which is harder to imitate?