Everyone hates projects and yet we do them anyway: The product-company dream.

I can tell you that 20 years in the project business does not go by without a trace. Almost everyone I talk to in the industry is actually fed up with it. Too much movement, too many moving targets, too much stress. Sooner or later, almost all digital agencies feel the need to launch a product. And it is often seen as a kind of “promised land” where milk and honey flow. This is usually due to two things: Frustration with the existing business and a lack of understanding of what product-based business really means.

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The project dilemma: the lack of win-win-win situations

To be honest, in many years I have only very rarely experienced a project that went really well across the board. That doesn’t mean that the other projects fail, but it has more to do with the definition of a good project.

I think there have to be three winners in a really successful project:

1. The customer because he receives a product that brings him the desired ROI “in time & budget”.
2. The provider who wins a satisfied customer and was able to generate a profit with the project.
3. And the provider’s employees, who were able to develop a good product in a good atmosphere without too much stress, who learned and had fun with the customer.

However, in my experience, one party suffers in most projects. In most cases, it’s the employees who simply have to bite the bullet and sometimes have to take part in a pretty mindless circus. Unfortunately, this is the norm. Look around you. There are enough agencies that have a really blatant fluctuation rate.

I see entrepreneurs as having a duty to do two things here; a) only hire really good employees and b) then protect them. Not infrequently, it has to be said, from themselves. Because some people, especially at a younger age, simply take on too much and can’t cope with the pressure.

In most cases, the agency’s profit also suffers. If all agencies could really charge through, our industry would be in a completely different financial position. But it doesn’t.

In rare cases, the client pays for the other two parties. As a rule, however, the agencies know how to prevent this from happening to too great an extent. So all parties simply pay a little for it. The result is this project frustration.

The things I hear from clients and agency representatives about other projects are mind-boggling. And I can say with a clear conscience that there isn’t an agency worth mentioning in Germany and Switzerland that I haven’t heard memorable project stories about.

Sustainability of the business

From a business perspective, projects are also somehow not very sustainable. This is because a project is characterized by the fact that it has a defined start and end point. And the vast majority of clients do not have enough projects to ensure long-term sustainable turnover for a medium-sized agency. Once an agency has a client like this on the hook, it all too quickly becomes dependent on this client, which is not a good thing.

The other is: before the project is after the project. I can say from my own experience that at the beginning of an agency story, or when you are new to the industry, there is quite a lot of “excitement”. The first project sold is over 100k, the first 500k, the first over 1 million, the first over 5 million.

“The ceiling is the limit!”

These are moments that you will never forget. But the champagne, or whatever you prefer to drink it with, flows less and less each time. At the end of this development, you simply go home after closing a huge deal and sit in the office the next morning chasing the next thing.

Scaling via manpower

Another problem is that the agency business can currently only be scaled to a large extent via manpower. That’s stupid from an entrepreneurial point of view. Because finding good people, giving them great work and making them part of the company is very difficult. And expensive.

Product FTW!

One product seems to solve all these problems. Especially a software product. It can be copied and sold without limits, practically without hiring an additional employee. Or, as a SaaS subscription, it can generate regular, recurring revenue. And you’re free of stress, because customers simply use the product. This is far less complex than managing a multidimensional project. And the deadlines? Yesss, finally no more stressful deadlines.

As you can see… It’s all too good to be true. Because product business is just as hard. Just in a different way. I’ve been pitched countless ideas in the last few years and I’m very happy to give feedback, just write an email and pay for lunch, and try to give nice but honest feedback. That’s often very hard. Because the product business ideas that come in are often simply a “scratch-your-own-itch” thing from agency owners who are just project-ridden. Most business owners make fundamental mistakes and have glorified ideas. Here is a small, non-exhaustive selection:

Strategic principles

Ideas usually fail because of the fundamental strategic concept. For example, the digitization of existing processes is widespread. At first glance, a logical and good thing. However, most ideas are based on wanting to cover long-established processes and industry constellations digitally. I think this is sheer nonsense.

A strategic concept must always be geared towards solving a customer problem. The simpler and cheaper, the better. This automatically encourages unconventional concepts, which are then truly new and have a much longer half-life.

Always sit down and think without having existing solutions and best practices in mind: How would I solve the customer problem with today’s technical possibilities? And not: How can I digitize an existing solution?

Having functioning code is by no means a product

I often meet people who already have an application running. They usually think that all they have to do now is make it a little prettier, write the documentation, set up support and a cart and then they can get started. “That’s nonsense, of course,” you’ll say. It goes without saying that marketing and distribution etc. means a lot of effort and money. And that’s the way it is.

But before that comes the hardening of the code. Questions like: What happens if 20,000 customers use the platform? What if we have to quickly deploy a security-relevant update across the customer base?

“In many cases, the code base cannot keep up with the targets in business plans!”

If you go all in anyway, it may or may not come to a crash relatively soon. Namely when the product is being used intensively but you have permanent quality problems. This then feels a bit like a project that’s going wrong – simply with 20,000 project stakeholders on the customer side.

Support

Support is important. I already know that many start-ups focus radically on autonomously functioning platforms and want as little human interaction as possible for various reasons. VCs also generally push this. As much as I like this in principle, I still value really good support. For two reasons:

1. It is one of two fundamental ways to shape the customer experience. The other is the product itself. There is nothing better for a customer relationship than a problem that the provider’s support has solved to the customer’s satisfaction in a short space of time. It is incomprehensible to me why so many companies invest huge sums in image and “blah blah blah” on the one hand and, on the other hand, simply miss out on the best opportunity to convey an image to the customer – in the case of support – with outsourced, poorly trained staff and dubious regulations.

2. You are never closer to the customer. No broad-based survey, no market research. It is the ultimate opportunity to learn more about the needs and concerns of your customers. This in turn is the raw material with which you can develop a truly outstanding product.

Become a product company!

The biggest misconception, however, is that it is possible to grow organically from an agency business into a product business. Of course there are examples. Magento or 37Signals, for example, are very prominent. But as a rule, this does not work.

Because setting up a product business is extremely time-consuming and requires constant work. This is particularly difficult in small companies (< 100 FTE) because projects also have to be done and as soon as something doesn’t run smoothly, 100% attention is needed again. As a result, how could it be otherwise, the product is neglected.

But it is also a fundamentally different culture. Project business is much more dynamic & short-term. Developing and marketing a product requires much more foresight. Also financially. And yes, also in terms of investment. Because without this, it simply doesn’t work.

Why do we do projects in the digital sector?

And so many, even if they have ideas and discussions, simply stick to the project business. Because it’s simply very simple. Someone who can sell themselves teams up with someone who can program. And the agency is up and running. You can start boosting this with a credit card.

Sure, I’m exaggerating. But it’s going in that direction. As demand is so high and customers have a low level of expertise, almost anyone with good digital know-how can generate sales in the first month.

The real challenge for agencies

Even if many agency owners see product sales as a kind of higher entrepreneurial existence, I think this notion is a misconception. Rather, I consider the real challenge to be the independence of the business.

So that the agency team can carry out projects without management being involved. It’s unbelievable to me how many larger agencies can’t do anything without managers. On a day-to-day level, of course.

For many entrepreneurs, this should be the challenge that needs to be mastered. Because once that is done, there would also be the time and energy to take care of a product. Would have. Would. If.