From services to digital products – why we are changing

3rd July 2017
Yoav Aviram

Energized Work is 10 years old this month. Somehow, against all odds, we survived. Now that we’ve officially entered our teens, I’d like to share with you some of our plans for the future, but first let me take a quick look back at the past.

Energized Work grow out of a skunk works team formed by AOL in 2005 to figure out what to do about the phenomena which later came to be known as Social Media. In 2007, when the project ended, we broke free and incorporated as Energized Work. Our first client was Sky, where we were given a chance to introduce Agile (and Extreme Programming) and demonstrate that our unique approach of delivering quality software is incredibly effective. Over the next 3 years we established a reputation as one of the best software delivery shops in the market.

By that time we felt we had enough evidence that our approach works across a variety of industries and projects. We figured we had proved whatever there was to prove about delivering quality software on time and on budget. We were, however, deeply troubled by a growing realisation that high quality code does not always equate to, and in fact is often very far removed from, business value. Over the next few years we worked hard to expand our approach to include Lean Thinking (which we introduced to Sky in 2013), service design, UX and end to end product delivery. Later still we added business analysis and Competitive Engineering, and today we design, build and scale digital ventures for a variety of clients whose kind testimonials inspire and motivate us every day.

Investing in Digital Products

About a year ago we realised that although business is good, the trajectory we were on was not completely aligned with our long term aspirations. After some soul searching we made a decision to invest, heavily, in building and taking to market our own digital products. Our intention is to use the revenue from our existing services-based business in order to fund experiments and take to market alternative digital product based business models. The longer term goal is to grow a viable product-based business alongside the services business we have today.

We are doing this for two reasons. First because we are keen to explore business models capable of generating non-linear revenues, where the return is not directly correlated with the amount of effort we invest. I find the term ‘unit economics’ distasteful in the context of a people business, so please pardon my French, but after years of selling what basically amounts to our time, we’re finding that the fundamental unit economics of a consultative services business too limiting in terms of profits, personal growth and creativity.

The second reason why we are betting on a product business is that from the very beginning we’ve made it our mission to be the voice of the customer in every conversation. Our hope is that by getting paid for our work directly by the people who use our products we will be more productive, more creative and ultimately happier. We were always in favor of self organizing teams and flat hierarchies, and although there’s an old saying that as long as you’re selling something you have a boss, by selling directly to customers, and not via clients, we will have one less party to answer to.

How committed are we? A year ago we set ourselves an objective to generate £1M in revenues from the products business in 3 years time (which makes it 2 years from now). Anyone with the experience of taking digital products to market will testify that this is an ambitious objective. We’ve sketched a plan and are actually following it, learning as we go along.

Having personally taken to market 3 digital products in high growth startups, I am fully aware of the risks and difficulties this commitment entails. One of my favorite statistics in this regards comes from a McKinsey study which showed that 17% of large IT projects go so badly that they can threaten the very existence of the company. I’ve been burnt hard, and have learnt that the risks involved in an early stage ventures don’t align with my personal risk appetite and lifestyle. Across the EW team many other people have similar experiences, scars and war stories to tell. That is all to say that we are approaching this challenge with our eyes open. We seek to manage and mitigate risk. We are aware of our biases. We are aware of the best practices as well as the common pitfalls. We have deep respect for the unknown unknowns.

A Method to the Madness

And so, the Energized Work Innovation Programme was born. We have quite a bit of experience setting up innovation programmes for our clients, but since our clients are mostly FTSE100 companies and global brands, and we needed an approach which will work for a small services business, we knew that we had to evolve our methods. We figured that the areas we will have to cover include, at the very least, product and investment strategy, investment portfolio, idea pipeline, customer discovery and validation, go-to-market & growth, governance & reporting, not to mention the legals, taxation and financial aspects unique to high growth ventures.

We are methodical bunch who despise reinventing the wheel. The first order of business was therefore to research what other companies our size have done when facing similar situations. More specifically we looked for small to medium services businesses who have made the decision to methodically transform into a digital products business, and have written about their journey, learnings and the tools and methodologies used. We were not interested in companies who invested in one product which happened to be successful. We found plenty of specific methodologies and war stories, but very little regarding the journey, learning or end-to-end approach. For that reason, we have decided to share our journey, so that others can learn from our hard-earned experience.  We also hope that smarter, more experienced people who happen to read this series of posts can add to the conversation.

This is the first of a series of blog posts which will cover product & investment strategy, portfolio approach, ideation process, customer discovery, customer validation, crew participation, investment process, budgeting, governance, growth hacking and of course Mocklab – our very first product investment. In addition we will be open sourcing all of the tools, aids, artifacts and methodologies we develop. To be clear, this is a work in progress and as we learn, just about anything may change.

I’m excited because this first step represents a giant leap. I hope you’ll find our ramblings of use.

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