Jusletter IT

Productization (see for example Rekola, 2007; Rekola, 2008; Rekola&Haapio, 2009b) is a method to clarify, simplify, standardize, and visualize the invisible and the abstract. Productized contracts can become management tools that help you improve performance, prevent problems, and generate transactions with predictable outcomes and no negative surprises. Successful contracting goes hand in hand with what is actually sold to the customers and what they think they bought. It is essential to ensure that the contract terms reflect this marriage of expectations and commitments (see Figure 1). This is especially important in the area of services, where there may be no tangible products or goods to allow simple validation. Productization and visualization can facilitate mutual understanding between all parties and ensure that they not only think they understand but that they actually do understand each other's intentions, expectations, and promises correctly.

For service development, coming up with viable service content is seldom the biggest issue; the real hurdle is bundling it into an entity that is of good quality and is easy to understand, sell, buy, and multiply or replicate, and that sets the service provider apart from its competitors in a positive way. (Rekola, 2007) Good-quality contracts can provide a valuable tool for quality and project management and a visible script to follow throughout the business relationship - as well as concrete guidelines to make sure that the measurable elements of the service product stay within the acceptable limits. (Rekola&Haapio, 2009b) Productization and visualization of both services and service contracts and contract terms can help overcome the barriers to collaboration and facilitate successful communication and understanding between all parties.

Improving the contracting process and making contracts more understandable with the aid of contract productization and visualization, is an important part of a research project called «Proactive service procurement practices: promoting profitability, reducing risk, and preventing problems in industrial service business and service business relationship management». The basic goal of the project is to create practical tools and methods to facilitate successful service procurement and to manage and sustain a mutually satisfactory service relationship. The research also promotes proactive contracting as well as practices that incorporate contracts and contract literacy into service business management. Anyone interested in the research project should contact the author of this paper.

Many problems arise from misunderstandings and misconceptions. Productization entails bringing together the capabilities of the company (its ability to deliver the service), the expectations of the customer (what the customer thinks the service is about), and the offering of the company (what the company promises to deliver) as in Figure 1. A discrepancy between these three elements leads to problems. This can be avoided if the service is described accurately and a contract based on the description of the service product is signed by all parties. (Rekola, 2007)

The productization philosophy is based on modular design and lean thinking and emphasizes the need to make intangible things more concrete and visible. Service productization means breaking the service process into modules that can be used by several service processes, and bundling a set of those service modules into a package, a service product. The goal is to standardize the content of a company's service offering as much as possible, and visualize and concretize the intangibility of services to make them easier to handle. The five steps of the productization process are: analysis, modularization, packaging, configuration, and visualization. A productized service is a package of service modules wrapped in a contract that describes the roles of the parties and the core content of the offered modules and contains appropriate terms and conditions. (Rekola, 2007; Rekola&Haapio, 2009b) An important outcome of the service productization process is the service description that specifies the what, where, how, and by whom, etc. of the service concept. Visualization can aid the creation of an accurate description as well – especially by facilitating understanding between the members of the productization team.

There can be no collaboration without communication. Communication happens on many levels and in many ways: between individuals, between different departments in the company and between the company and other stakeholders in the value net. There are a lot of barriers to effective communication: companies have different business cultures, people come from different backgrounds, even technical problems within the communication channels. When people are involved there is always the human element: subjective conceptions and likes and dislikes can affect the way people communicate with each other. (Rekola, 2008)

Language is neither separate from its users nor from the situations where it is communicated. Subjective meanings need to be discussed to be revealed. In international trade, language problems appear in a very concrete way when different legal systems and multinational legislation are involved. The terms used may be the same, but differ in their contents. (Pohjonen and Visuri, 2007) Quite often the problem may simply be that for example the members of a productization team either quite literally do not speak the same language or come from such different professional backgrounds that they fail to make their words and expressions understood.

Contracting provides a good example of cultural barriers between professionals. It is a function that is often considered totally separate from for example product or service development. Indeed, when engineers talk about contracts, they mean a legal document that has been drafted by lawyers and signed by the customer. However, in reality contracting should be a part of all functions, including service development and the pursuit of service innovations. (for example Rekola, 2008) Contracting is a process in which a wide range of people and functions are involved – a collaborative venture. People involved in international dealings must master the ABCs of cross-border transactions and contracts. They must be contractually literate. They must identify and understand what exactly is being agreed upon. By working together, business, contract, and legal professionals can help avoid unnecessary problems, build a stronger foundation for business, and secure contracting success. (Haapio, 2004)

When buying a service, the only tangible thing you see may be the contract. Sometimes the contract is the product you buy. How do you quickly see what is for instance inside and what is outside its scope? How do you figure out what follows if delivery is late or fails? How do you compare different offerings – or contract terms? Visuals and productization can make offerings and contracts easier to understand and compare, for buyers, sellers, developers, and the front line alike. The result could be a demystification of the contracting process and a contractually literate organization. Visualization engages people and facilitates easier and faster communication and understanding. It works in supplier selection, and also implementation: visualized contracts can become road maps that are easy to follow. It facilitates understanding between people with different backgrounds, either different nationalities and languages or professional groups. (Rekola&Haapio, 2009a)

But what would be the right level of productization and visualization? What can be successfully productized and visualized? Would a visual contract with no words even be possible?

There is no point in productizing a process that is not going to be repeated. Tailored B2B services are a good example. However, it often makes sense to productize some parts of the service process that may then be used in the production of other services. (Rekola, 2007) The same goes for contracts. Before starting to productize all contracts, one should try and see the big picture, analyze the existing contracts to see what similarities and differences exist, and how standard templates and contract forms need to be adjusted or updated to serve as a good starting point for new contracts. Like in the case of services, if most of the contracts need to be tailored, productization does not make sense.

We have to ask ourselves whether we aim to illustrate or use visualization as a way to facilitate communication, collaboration, and understanding. Illustrations are good and even necessary for some purposes, for example in marketing or sales material and brochures. However, contract visualization can also serve a more practical purpose: to make contracting processes and documents more understandable, manageable, and better suited to be used as management tools.

What kind of visuals should we use? The way people understand visual images is firmly embedded in their backgrounds and has a definite cultural context. It is possible to end up with visuals that are easily misunderstood unless people learn a new 'visual language', as in the meanings of specified visual images and the rules for their use. If visuals are very different from the generally understood forms, icons, and symbols, their purpose is defeated. Instead of demystifying they will create more complexity. Even though icons, unlike symbols that are based on a general agreement of their meaning, are based on images of concrete objects, even they can be misleading if one does not have the right cultural or professional background. For example the image of a computer disc used to mean 'save' has no meaning as such for those who have never come in contact with one. Another interesting example is a telephone: for the generation that grew up with cell phones, the image of an old-fashioned telephone may have no meaning. (Rekola&Haapio, 2009c)

The challenge is to use visuals in a way that removes complexity instead of adding confusion. It is natural that being products of our various backgrounds we do have our preconceived ideas of what different visual images mean. It is most likely impossible to create a visual language that would immediately be understood by all without any additional information. When visualizing contracts an important guideline might be to first understand the context and the people that are going to need to understand and use the information we plan to visualize. (Rekola&Haapio, 2009c)

Not even productization and visualization are magic tools that work in any given situation or can solve any given problem. Before embarking on a mission to productize and visualize everything from services and service descriptions to contracts and contract terms we should take a good look at the situation. When applied correctly and for the correct purpose, productization and visualization can help achieve greater business success and facilitate communication and collaboration. Service productization, on one hand, and contract productization (including the visualization of the deal landscape and who is involved as well as the contents and life-cycle of the contract) on the other, should represent two compatible sides of a process that produces successful service contracts that serve as a road map throughout the service relationship and guide the production and delivery of good quality service products that generate value for all parties.

Figure 1: Expectations, intentions, promises, and the ability to deliver the agreed service come together in the service relationship, guided by a service contract as a road map (Rekola & Haapio, 2009)

Haapio, H., 'Invisible Terms', Contract management, July, pp. 32-35, (2004)
Pohjonen, S. & Visuri, K., ' Proactive Approach in Project Management and Contracting', (2007)
Rekola, K. «Service Design as a Basis for Successful Contracting», Contracting Excellence, IACCM, (2007)
Rekola, K. «Service Design as a Basis for Successful Commercial Contracting», IACCM EMEA Conference Proceedings, (2007)
Rekola, K. (2008), «From Industrial Service Providers to Performance Partners — No More Services for Free», Contracting Excellence, IACCM, (2008)
Rekola, K. «Service Design as a Basis for Successful Commercial Contracting» in «Corporate Contracting Capabilities; Conference Proceeding and Other Writings», Joensuun Yliopisto (2008)
Rekola, K. «Collaboration from Idea Creation to Delivery – Challenges and Advantages of the Collaborative Approach to Service Innovation», IACCM Americas Conference Proceedings, (2008)
Rekola, K. & Haapio, H. «Industrial Services and Service Contracts – A Proactive Approach», Teknologiainfo Teknova (2009b)
Rekola, K. & Haapio, H., «Better Business through Contract Productization and Visualization», Contracting Excellence, IACCM, (2009a)
Rekola, K. & Haapio, H. , «Better Business through Contract Productization and Visualization Part 2», Contracting Excellence, IACCM, (2009c) to be published

Katri Rekola, Chief Executive Officer, Rekola Design
Kaukolantie 4
02140 Espoo, FI
Katri.Rekola@Kolumbus.fi; www.tuotekehitys.info