Seems like all we're called to do these days. "Hi, we're a services company", the call goes, "and we agree with what you say about the margins in our business. But tell us how do we get out of this hole? We don't believe those rosy predictions from the association."

We've worked with several companies in this fix. And found a few paths that seem to work well across the lot.

The first thing to do is for you to recognise-really, really recognise-that the world has changed. It will never come back to those days when you charged $80 an hour for some fresher you put on a plane with an asp for Dummies textbook. You made a killing then-and you will never make one again. So if you harbour secret hopes of an it-services revival where your margins will go back up-either persist in your hallucination and ignore this article-or, decide you don't and read on.

	Going By The Book
	The Community Spirit
	The Sign Of Three

Now that you're agreed that glory days are over, be ready for change. But how do you implement change without firing your entire staff that is helping you eke out whatever living you're making? That level of risk-taking is beyond most companies.

Well there is a way to take a measured, hedged risk. I call it the bread, butter, and jam solution. Your services are the bread-and-butter of your business. Admittedly getting smaller-but you're still surviving on it. You need to move to quickly make jam-a product that will add all the flavour and excitement to your company.

Keep your services going-there's no choice really-and start by figuring out what product to make. This is the single-most important decision. There will be the temptation to take a current or old project and turn some part of it into a product. A dozen logical reasons might point to this choice-and all of them would be wrong.

All you're likely to get out of anybody-can-do-it projects are everybody-has-done-it products. You will find even fewer takers and revenues for these compared to project fees. No-you need to make a radical change and try think up a product no one else in the world has done before. It will in all likelihood not have anything to do with your past projects-and that's a good sign. Think of it as though you were creating a new company on a clean slate-what product would you make?

All of this requires serious mindshift to occur in the minds of the promoters. Some might argue that it's like running two companies out of one premise-and that would not be a bad description.

Pick one person from your founding or management team to drive this product. Take away all other responsibilities from this pathfinder, yes all of it-and let him or her do nothing else. Do not second or third-guess this person's actions or ask for reviews at every step.

This may be anathema for the control freaks among you, but your pathfinder is building an entirely new company for you because the old one you built is obsolete. No reason for them to report to you. The other way around, perhaps!

Is this risky? Not really. Remember, 95 per cent of your business will still be engaged in what it always did-the 'safe' services thing. Your internal entrepreneur will need some resources over time. Not immediately. Commit and support this. Again-it's more important to start pre-marketing the product idea and look for customer demand before you write a single line of code.

Many make the mistake of thinking you actually need a product in hand to sell it. The cart in software is usually before the horse. I've heard enough apprehensions that it costs enormous sums to build a product. Microsoft spending $4 billion on Windows XP etcetera. Remember-in every instance the product was pre-sold and pre-marketed before that sum was spent.

Look at this skunkworks effort every six months. Worst case: you might all agree to shut it down, along with the rest of your company. Typical case: you'll say you want to try something else. Another product that may have a better chance. Best case: this product brings in so much jam that you'll stop worrying about the bread and butter.

Mahesh Murthy, an angel investor, heads Passionfund. He earlier ran Channel V and, before that, helped launch Yahoo! and Amazon at a Valley-based interactive marketing firm. Reach him at Mahesh@passionfund.com.