Products or Solutions

The McKinsey Quarterly has an interesting article which differentiates between the two, suggesting that “companies can earn higher margins or increased revenues by selling integrated offeringsif they dont merely bundle their products.”

Not every company has to sell solutionsmany successful businesses offer products, services, or bundles of either or bothbut companies intent on selling them must recognize that their economics, and thus their managerial imperatives, differ from those of product bundles. In the absence of such an understanding, vendors might invest in packaging a pseudosolution that competitors can disaggregate and bid against. The crucial first step is therefore to understand what a solution is and how it differs from products or bundles of products.

In the broadest sense, a solution is a combination of products and services that creates value beyond the sum of its parts. In practice, solutions are usually born when a vendor can meld a certain level of expertise with proprietary intellectual propertya method, a product, or an amalgam of the twoto handle a problem for a customer or to help it complete a step in its business. More specifically, it is the level of customization and integration that sets solutions above products or services or bundles of products and services. These two elementscustomization and integrationare more than just the glue that holds the package together: the way the elements are integrated and the extent of the customization define the added value for buyers and earn the added financial benefits for sellers.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.