Products or Services? A Crisis of Identity

Its a trap a number of services companies fall into. Develop an internal tool or a nice looking application, and voila! maybe this can turn into a product? Trust me, more companies make this mistake than you would think - and occasionally, very occasionally, one does ok in the market. If you've done it and failed, perhaps you'd be relieved to know that some of the big PS outfits have made that mistake as well?

So if your passion is to build product, you have two relatively hard choices (a) Look for external funding (b) Internally fund it from services. Now this is where the crunch comes in.  I had two big issues with external funding in the past when I was part of teams that took it (i) It came with a lot of baggage - a lot (ii) I'm one of the oddballs that has a tougher time spending other people's money than my own. So the question was, how do we internally fund product development? Here's what we do, maybe this helps you craft your own strategy?

1. Be rigorous about selecting what to productize. We go through several ideas a year, and maybe, pick one. This, after a lot of research, and potentially some money spent prototyping some of them.
2. Let go pet ideas unless you can very quickly monetize them. Be incremental in execution (read venturehacks  for a really good exposition on this).
3. Take on services work, but only if it involves a similar style of development to yours. We take on outsourced product development work, preferably in small teams - fits in great.
4. When in doubt, pick the better practice. For client projects, provide the same level of passion and creativity that you would your own efforts. For your own efforts, provide the same level of urgency that you would client projects.