Learning from Lerner... Is the Grass Always Greener?

The phrase "the grass is always greener on the other side of the fence" is an old and profound English saying. It means, essentially, that humans in their very nature look around them, see what others have, and desire it in many ways more than what they have. The neighbour's grass, on the other side of the fence, seems to be more lush, greener. Of course, it is usually just an illusion, one created by focusing on that aspect of the grass. Sure, the grass is greener, but the ground is rockier and there is a daily infestation of ants that makes the grass very uncomfortable to sit upon.

I received a lesson in the truth behind this, and proceeded to develop it further, from my friend Reuven Lerner. Reuven is a technology consultant who specializes in developing and teaching Web technology. He is first-class with a very broad and deep range of experience.

I was having a discussion with Reuven about the desirability of products and services vs. consulting. He responded with the following quote:

"Consultants always wish they had products for recurring revenue… and product companies always wish they had consultants to know what is really going on inside the company."

Consulting is a fascinating business. For intellectual stimulation, there is absolutely no match. The problem with consulting (as any consulting manager will tell you) is that you are selling time and expertise. The moment you stop selling is the moment your revenue stream disappears. The consultant/owner is the business for all intents and purposes. It is for this reason that most consulting firms are never sold, and if they get big enough to be sold, it is usually for 1x revenue.

Products, on the other hand, have a value of their own. They continue to generate revenue after you stop building and developing them. They will, of course, eventually die out if you do not continue to invest in sales, marketing, R&D and operations, but that takes time, and the revenue from today's sales can be reinvested. This is why product companies often sell for multiples of their revenue. The business can be handed off to another owner, and continue to flourish.

Consulting executives look at the recurring revenues and relatively high multiples of product companies with some amount of envy. They sometimes wish they could continue to generate revenue even when they do not sell, and could have the option to some day extract the invested value by selling the business.

Product companies, on the other hand, suffer from a different problem. Because they are focused around the products they sell, most of their staff work inside the company, not inside the customer. The problems they are solving are focused around the selling company and its products. The smartest product executives are acutely aware that customers do not buy their products because of the beauty of the product, the amazing features, the perfect price, or how good the selling company's internal operations are. Customers buy products because the mix of all of those solves the buyer's problem today. If the buyer's problem changes in behaviour or priority, if someone else's product solves it better, the customer will have no compunction switching to another vendor or none at all.

The best way to prevent being cut out, to prevent irrelevance, is to constantly be aware of the range of problems affecting the customer. When executives have problems that need solving, they have people they turn to to help them figure it out. These people are called consultants. Thus, the product company executive/owner often finds himself wishing he had... consultants!

In truth, both of these are valid perspectives, rather than a "grass is greener" behaviour. But if you are a consultant, your biggest issue is lack of recurring revenue, hence the infamous consulting "feast or famine" cycle, hence you focus on products that could bring recurring revenue. If you are a product executive, your biggest issue is lack of insight into the customer's broad problem set, hence you focus on how you could have better insight.

The grass is always greener, but sometimes the best grass is right in the middle.