Summary of Key Points
Over the past two decades, the environmental protection industry has experienced rapid growth through the "engineering model" (such as EPC contracting). However, as market growth has slowed down, the problematic wave-like development pattern—where there's a surge of activity when projects arrive and panic when they end—has become evident: unstable revenue, difficulty in building sustainable capabilities, and diminishing profitability. Now, the industry has entered an era of "product-based survival," where companies must shift from "consumptive growth" to "accumulative growth," transforming their experience into reusable solutions, standardized modules, or ongoing services (not just equipment in the narrow sense). To achieve productization, three foundational aspects need to be established: understanding the market, delivering effective solutions, and generating stable revenue. Many companies are hindered by three barriers: overly diverse businesses, chaotic organizations, and misaligned incentives. Productization is not an optional choice; it's a necessity for survival in this era of limited growth.
Detailed Explanation
1. Why the traditional model of making money from projects no longer works?
The dominant model in the environmental protection industry for the past two decades has been the "engineering model"—where companies would undertake a project (such as building a wastewater treatment plant or installing an incinerator), complete it, and then receive payment before moving on to the next one. This model resembled hunting: you get food if you catch prey, or you go hungry if you don't.
During the period of rapid market growth (when many environmental facilities were needed), projects came one after another, leaving little time for reflection. But now that most of the necessary facilities have been built and growth has slowed, the drawbacks of this wave-like development are becoming apparent:
- Unpredictable revenue: You might sign 10 projects this year and only 2 next.
- Wasted effort: Each project requires starting from scratch, with experience scattered across different projects and not being consolidated.
- Challenging organizations: Staffing fluctuations (hiring during peak times and laying off during quieter periods) prevent the accumulation of expertise.
As a result, many companies are struggling despite being busy; the problem lies in the underlying model itself.
2. Environmental protection "products" are not just equipment; they're capabilities that don't need to be reinvented every time
Many mistakenly think productization means selling equipment. However, the environmental protection industry is unique: each project has different requirements (e.g., wastewater from printing and dyeing versus electroplating), making it impossible to produce standardized solutions like in the electronics industry. Nevertheless, "non-standard" doesn't mean there can't be products. Environmental protection products are reusable assets, such as:
- Mature solutions for specific types of wastewater (which can be quickly applied based on water quality analysis).
- Verified process parameters (like a prescription with precise dosages and aeration settings).
- Ongoing maintenance services (providing long-term management of the facilities after construction and charging annual fees).
The essence of productization is to avoid reinventing the wheel after each project.
3. Three foundations for successful productization
Productization isn't just a slogan; it requires a systematic approach in three steps:
- Foundation 1: Understanding productization—understanding customers' problems better than they do.
For example, a company specializing in dyeing wastewater in Shaoxing can immediately identify the type of waste (active dye from polyester simulated silk) based on the provided water quality data. This deep understanding of niche markets allows for quick responses and reduces errors, building customer trust.
- Foundation 2: Delivering productization—relying on systems rather than individual experts.
In the past, project quality relied on the expertise of senior technicians. Now, this experience should be systematized (e.g., using 70% of existing solutions with only minor adjustments, and documenting parameters as standards). This enables new employees to perform well without relying on a few key individuals.
- Foundation 3: Generating stable revenue—moving from one-time transactions to recurring income.
The engineering model focuses on completing projects and leaving; productization aims for ongoing relationships (e.g., providing maintenance services for wastewater plants or selling chemicals/services for industrial waste treatment). Revenue shifts from being dependent on new orders to a steady stream from regular customers, reducing anxiety.
4. Overcoming the barriers to productization
Many companies recognize the benefits of productization but are hindered by three major obstacles:
- Obstacle 1: Diverse and fragmented businesses.
Trying to cover too many areas results in superficial expertise in none. For example, a company in Changsha handling municipal wastewater, industrial waste, and soil remediation fails to build substantial expertise. The boss might avoid focusing on one area, but this leads to lack of depth in all areas.
- Obstacle 2: Chaotic organizations.
Engineering companies are constantly dealing with urgent issues, leaving no time for knowledge accumulation. For instance, a company in Jinan hired staff for experience development but sent them to emergencies, preventing any meaningful progress.
- Obstacle 3: Misaligned incentives.
Rewards focus on short-term goals (number of contracts, output value), not on long-term efforts (knowledge organization, standardization). For example, employees who sign large contracts are praised, while those working on standardization receive little recognition, discouraging investment in these efforts.
5. Productization is a matter of survival
In the past two decades, environmental protection companies survived by being aggressive and willing to invest. In today's era of limited growth, those that only know how to execute tasks will struggle. Productization helps companies transition from consuming resources to accumulating valuable assets. This shift is not temporary; it's an inevitable outcome of the industry's evolution. Companies that fail to adopt productization will find it increasingly difficult to generate profits.
In conclusion
The environmental protection industry has moved from a era where "whoever can secure projects wins" to one where "whoever can turn experience into reusable capabilities" thrives. Productization is not an optional activity; it's essential for survival.