By Ian Miell
The cultural shift associated with scaling from a bespoke model to a product-based approach requires strong alignment between all departments, and the finance team often acts as the linchpin.
Many companies struggle with scaling because growth is not merely about doing more of what already works. Fundamental changes in how the business operates are required. Scaling exposes weaknesses in systems, processes, and organisational structures that may have been adequate at smaller sizes but cannot handle the complexities of expansion. Companies often underestimate these challenges.
Financial teams are important
Transitioning from a bespoke service model to a product-based approach presents numerous challenges for companies, as it involves a fundamental shift in their business operations and mindset. One of the primary difficulties lies in redefining the company’s offering. Bespoke services are inherently tailored to individual client needs, often relying on close relationships and customisation. In contrast, a product-based approach requires standardisation, which can alienate existing customers who value the personalised aspect of the bespoke model. Striking the right balance between standardisation and flexibility is a complex process, as companies must ensure their product remains broadly appealing while preserving key elements of value that clients expect.
The key aspect of transitioning from a bespoke service model to a product-based approach is the fundament modifications necessary to the business’s financial dynamics, requiring robust planning, strategic decision-making, and precise execution. The finance department effectively becomes the heart of the transformation, enabling the transition by ensuring financial stability, providing strategic insights, and aligning resources with the company’s growth ambitions.
To successfully transform to a product solution model, a complete shift of the financial flow is required. The challenge is to bring about this shift without undermining revenue, sales, and existing customer relationships.
Scale-up transformation strategies
When a company decides to scale, it often faces a critical strategic choice: transform what it already has or grow something entirely new. These two approaches, while distinct, share a common goal of achieving sustainable growth but require vastly different mindsets, resources, and execution strategies; each has its own financial implications.
Grow Something New
Growing something new involves creating and scaling a new product line, business unit, or revenue stream that complements or extends the existing business. This strategy is often pursued when the company’s current offerings have limited scalability or when new opportunities arise that promise higher growth potential. Proceeding with this approach requires a focus on innovation and experimentation. The company typically starts by identifying gaps in the market, emerging customer needs, or areas where it has a competitive advantage. From there, resources are allocated to research, development, and prototyping to bring the new idea to life.
The key to success when growing something new lies in balancing the exploratory nature of the venture with disciplined execution. Companies often establish dedicated teams or business units to drive the initiative, freeing them from the constraints of existing operations. This allows for agility and focus while minimising disruption to the core business. As the new offering gains traction, the company invests in scaling it further, whether through increased production, expanded marketing efforts, or building new distribution channels.
Financially, this strategy requires a significant shift in thinking.
Transform What You Have
Transforming what you have involves scaling up the existing business model, processes, and offerings to handle greater demand or market penetration. Companies taking this path focus on optimising their current operations and leveraging existing strengths. The process often begins with a thorough analysis of what is working well and what is not. This evaluation identifies bottlenecks, inefficiencies, and limitations in current systems, such as outdated technology, inadequate workflows, or underprepared teams. Once these weaknesses are addressed, the company invests in upgrading its infrastructure, automating processes, and refining its value proposition to ensure it can meet increased demand without sacrificing quality or efficiency.
There will likely be significant investment in employee training, technology upgrades, and customer support to ensure the business can handle larger volumes without alienating existing customers or compromising service levels – this can present financial challenges. The company may experience a temporary decrease in revenue or even lose some old clients.
During the transition, the company may need to operate in two modes simultaneously – minimum servicing of existing bespoke contracts while developing the standardised product. This can strain resources and requires careful financial management.
Preparing for transformation
Scaling your company requires an appropriate shift in mindset and this starts with finance.
It is important to engage your finance team early, making them part of the transformation process from the start. They need to understand the long-term benefits of the new approach.
You will need to rethink your financial metrics to reflect the (fingers crossed) success of the product-based approach. You might look at Customer Lifetime Value (CLV), churn rate, or ratio of customisation revenue to product revenue.
It is also advisable to revisit your commission structures; you want to be rewarding sales of a standardised product rather than customisations.
Training is another crucial aspect. You may need to offer help to sales teams, teaching them how to sell a product rather than a service, or your developers may need some assistance shifting their thinking from custom solutions to scalable feature.
By aligning your financial structure with your new product-based mindset, you create an organisational structure, culture and environment where transformation can take root and flourish. The finance department is more than just a support function during a company’s transition from a bespoke model to a product-based model. It is the strategic driver that enables the company to navigate financial complexities, allocate resources effectively, and achieve sustainable growth.
About the Author
Ian Miell is a partner at Container Solutions, and has been helping companies, across industries, move to cloud native ways of working for over ten years. Container Solutions develops a strategy, a clear plan and step by step implementation helping companies achieve a smooth digital transformation.
