Product based or services based - which company should you choose to start your carrier

Product based vs Services based

In this article, we will discuss Product based business and Service based business. To make the right decision and to know the difference between the two kinds of firms, you should have clearance about the concept of both, Product based firms and Service based firms. So, let's find out which one is better.

What is a Product based business?

Product Company is a company that develops products focussing on a particular industry, say for Eg. One of the areas, AutoDesk develops products are in the construction/civil work. Product-based is a fundamental part approaches to project management and is a method of identifying all of the products (project deliverables) that make up or contribute to delivering the objectives of the project, and the associated work required to deliver them. The documents which define the Project itself are also considered Products. Eg. Autocad, 3ds Max.

Advantages

  • A significant advantage of product-based planning is the ability to surface critical assumptions and constraints. For example, if your project is to build another floor on top of a house a required product will be the floor underneath on which to build the one you are commissioned to deliver.

  • As a product, you hope that it is there and will be fit for purpose but as you are not commissioned to deliver it, it falls outside your scope - and into your assumptions. In this way, by defining the whole product set necessary for the project, and not just those that are in your scope, you can surface and document the critical assumptions.

  • Another advantage compared to activity-based planning has to do with reporting.

  • Products are either finished or not, activities can be 90% finished for a long time even though work is taking place. One tends to forget things that have to be done to complete a project. This method captures them all, reducing the chance that any will be overlooked.

  • Life is challenging in the product based company because all the innovations are done here. If you are keen to learn then you will be given good problems to solve.

  • Quality check: In product based company quality check is quite important because even a minute ignorance can create a huge impact on the product. So you will learn how to ensure the quality of deliverables.

  • There will be an overload of work and life might get quite hectic many times.

  • There's a lot of scope of learning because, in the product based company, the employer always wants his employee to push their limits and get a max of the work done with limited manpower. So you might need to learn another technology as well.

What is Service based business?

Service businesses are enterprises that are established and maintained for the purpose of providing services (rather than or in addition to products) to private and/or commercial customers. The Marketing Association defined services as - activities, benefits, or satisfactions which are offered for sale or are provided in connection with the sale of goods. The overall service industry is regarded as an already robust one that should enjoy considerable healthy growth rates in the future as the United States and other nations continue to move from manufacturing-based economies to technologically advanced service economies.

The service industries involve the provision of services to businesses as well as final consumers. Such services include accounting, tradesmanship like mechanic or plumber services, computer services, restaurants, tourism, etc. Hence, a service Industry is one where no goods are produced whereas primary industries are those that extract minerals, oil etc. from the ground and secondary industries are those that manufacture products, including builders, but not remodeling contractors.

Advantages

Small-business owners who run service businesses often try to grow by offering products. If you own a service business, you know that expanding the services you offer can be a challenge, and you might be tempted to transform your company into a product-oriented business.

No Inventory

If you sell a service, you usually don't have any inventory. Instead of buying and selling products, you convince customers to take advantage of your ability to make their lives easier. You do not have to manufacture, so you have no production facility, and you don't have to wait for products to be finished and inspected so you can sell them. This frees you up to focus on sales rather than inventory or manufacturing.

You're an Expert

If you developed your service based on a skill you have, you are an expert in your field. You can increase the size of your business by becoming better at that skill. The downside of this is that you must duplicate yourself eventually. That means you have to hire people who can replicate the level of service you provide. This requires constant monitoring, evaluation, and retraining of employees. Where manufacturing companies must work to improve productivity, you have to work to improve the quality of service, which can be much harder to measure than productivity.

Increased affluence

As consumers have raised their standard of living, they have increasingly chosen to purchase services such as lawn maintenance and carpet cleaning that they previously took care of themselves.

Increased leisure time

Some segments of the population have been able to garner larger chunks of free time; this trend, coupled with increased wealth, has spurred a higher demand for certain service businesses such as travel agencies and resorts, adult education courses, guide services, golf courses, health clubs, etc.

Changing workforce demographics

Over the past few decades, increasing numbers of women have entered the workforce. This has spurred greater demand for services in such realms as child care, housekeeping, dry cleaning, etc.

Greater life expectancy

Another development that has had a particular impact on certain service sectors, particularly in the healthcare industries.

Increased complexity of products/technological advancement

High-tech products have created a corresponding increase in demand for specialists who can fix and maintain those products (computers, cars, electronic equipment, etc.).

Increased complexity of life

Many service sectors have enjoyed tremendous growth because of their orientation toward helping individuals and businesses stay on top of the many facets of today's fast-paced society. Tax preparers, psychiatrists and counselors, and legal advisors are good examples.

Increased environmental awareness

General trends toward increased ecological sensitivity and enlightened natural resource management practices have spurred growth in environmental service sectors (waste management, recycling, environmental advocacy).

Increased number of available products

Technological advances have spurred development of service industries in such areas as programming.

Differences between Product based and Services based

  • Whenever we think about starting a product firm, there is huge land required, basic machinery along with the person who knows to operate that machinery, to produce our product. On the other side, if we start a service firm, then from this phase onwards, we require a salesperson. It should be the person with good communication skills and the ability to convince the clients. If co-founder possesses these skills, hiring a salesperson isn’t requires at this level.

  • Product firms need to invest in buying machinery and large land in this phase. They required large space to keep those machines. So, that’s the reason, product firms can’t be started from a small room. But, Service firms don’t require any machine except basic machines like laptop etc. That’s the reason they can grow from a small room as well.

  • Due to the requirement of machines and manpower, investment is usually high in product firms from the prototype phase onwards. That’s the reason, they require a large amount of funding from investors. In contrast, Service firms can be started from a comparatively much smaller amount than product firms. If they get less funding from investors, then it does not have the severe effect on service firms.

  • According to the World Bank’s graph of Service economy and Manufacturing economy, we can see from 1996 to 2014, there is a constant downfall in the growth percentage in the manufacturing economy while there is a constant increase in the growth percentage in the service economy.

  • Product firms create their products or application in advance. First, the stock of the product is made or application is created, then it is presented in the market. On the other hand, Service firms work only on client requirement. Firstly, the client asks for a particular service from them, and then the service firms work on it.

  • Service firms, Candidates with average technical knowledge can easily get hired if they are having good communication skills and good marketing skills. To get a job in a service firm, a candidate should be well dressed, presentable and well mannered. It’s necessary for a service firm to hire well-groomed candidates, as they have to deal with the clients. In contrast, Product firms usually hire candidates with good domain knowledge of the technology. It rarely matters whether they are having good communication and sales skill or not. For product firms, employees grooming i.e. they should be well dressed, presentable and well mannered, is not necessary.

  • In Product Firms, people feel less work pressure and there is more job security in these firms. Management doesn’t fire people easily. Employees in a product firm don’t switch job easily but part-time jobs are rarely available in product firms. And, in Service Firms, People usually feel pressurise due to deadline associated with the project or service. Management also pressurises the workers regarding deadlines. If someone works at a snail’s speed, then he/she will get fired by the management. Even, some service firms fire the employees if the “On Bench” period exceeds particular months. That’s the reason that job security is less in service firms but Part-time jobs are easily available in service firms.

  • Product companies work for developing new technologies and products. So the employees need not be looking formal and obedient to any of the customers as most of them hardly interact with their customers. In Services companies the scene is completely different. People are enforced to be dressed formally (which I call as School Uniform). Some companies even find their employees not wearing uniforms if they forget to do even for a single day.

  • Product based companies will exist only if the service based companies buy their product. Service-based companies are the major client of the product based companies.

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