“At the end of the day, your job isn’t to get the requirements right — your job is to change the world.”
– Jeff Patton, Veteran Product Manager and Consultant
It’s been a very busy weekend and start into the week, so I am very late (or early for next weekend 😉 )…
In recent years I have been party to “product planning” sessions in different companies. Well-known brands across the DACH region; often with a strong mechanical engineering and manufacturing background.
Many have been “forced” by markets and competition to increasingly add digital functionality to their products. With limited in-house software capabilities on the traditional engineering side, IT departments were quickly drafted to provide the “digital” capabilities to these companies’ products.
IT, however, brings a certain historically developed mindset to the task: the piecemeal delivery of functionality to business functions.
In this traditional IT process “business demands” get translated into “requirements”. These requirements are understood to be fulfilled while adhering to a budget- and other constraints. IT usually forge them into “Epics”, “feature-“, or “change requests” that are then either outsourced/offshored or – increasingly again – developed by in-house teams. The resulting functionalities are then made available to the requiring business and become part of products or associated services.
“Successful implementation” of a business demand in this model usually means handing over some functionality or feature to the requesting business department.
There are several quandaries hidden in this model:
- Customer needs are communicated Chinese whispers-like across multiple relays until they get implemented; with the original need having a propensity to get lost in this translation
- Technical solutions are devised far from customers; only to get broken down further into projects and features, typically without customer validation and link to desired and measurable business outcomes
- Particularly when working with contractors, the resulting requirements also have to pass through a prioritization, budgeting, and procurement process, leading to delays and sometimes illogical “re-ordering” of related items (and the ensuing escalations that have to be managed again)
This model still delivers solutions somehow. At the same time there is usually no holistic view of or intentful strategy for the continuous evolution of the resulting solutions and – even less – the improvement of business outcomes relating to them.
Consider this example: last weekend I tried to help a friend buy iPads for his small business.
Having reached a decision which model to buy, he went on to order them online, intending to pay with his new credit card: Input credit card number, expiry date, CCV… . Done. Before being able to complete the order, he was asked to fill in another numerical code with a fancy marketing name as “second factor”. He got stuck as he had never heard of this code before.
Clueless what to do now, he tried is credit card’s PIN: wrong. Not wanting to risk blocking his card, he called the bank’s helpline. To no avail, it was weekend after all… Giving up and deciding to visit the local Apple Store after the weekend, the code later turned out to be an SMS-TAN that had been fancily rechristened by whoever implemented the authentication module.
Rather typical. Two-factor authentication: business demand delivered and technically working. The underlying business goal – facilitation of secure and seamless credit card transactions to increase online payment revenue – severely impeded.
Successful digital product development requires a different approach and mindset. To ensure successful business outcomes, IT (technology) and business cannot act separately. Digital technology is an inextricable part of today’s business and products. It is not a cost factor but rather the key enabler of customer delight and successful business outcomes.
This is still perceived as a disruptive change by many of our clients.
For one of our them, it meant that within less than one and a half decades the contribution of their sophisticated mechanical components had shrunk from > 90% to approximately 20%. After more than 150 years of proud and successful mechanical engineering, their hardware had de facto been reduced to an enabler of a digital business. Consequently, the business had in reality changed from hardware sales to a software solutions business enabled by proprietary hardware.
Still, hardware sales and the related project management were understood as the core of the business and they kept creating “demands” to be fulfilled and delivered by a single software department – without much of a joint prioritization or feedback loop. The result were often project time and -budget overruns of >100%, with aggravated customers becoming more of a rule than the exception.
It took a takeover cum new leadership team, a “digital product”-oriented strategy, and a massive restructuring into product units, combined with an agile working model to remake them into a serious contender in their field.
This exemplifies the three major changes required for digital success:
- A leadership that concentrates on the identification of strategic opportunities and their transformation into business objectives as well as aligning and coaching the organization in reaching them
- A focused and clearly communicated customer- and business-outcome oriented strategy with measurable target-KPIs to be pursued
- Customer-centric and empowered end-to-end product teams with a clear remit that is measured by outcomes; continuously supported and coached rather than micro-managed by the leadership team
This transformation is demanding. Organizations with an industrial background are historically focused on delivering output, a mindset that has also been adopted by their IT- and software departments. Marty Cagan’s recent post “Executive Engagement” (linked below) lays out the cultural and behavioral changes required.
Digital leaders like Netflix have scaled successfully by identifying and aligning their product strategy to a key outcome, in Netflix’ case “monthly customer retention”. Read more about how they built on this in former CPO Gibson Biddle’s post.
Outcomes, output, and KPIs are inextricably linked in the pursuit of a product strategy – but are often also confused. I have added Jeff Gothelf’s recent definitions to help untangling them.
Marty Cagan proposes a set of interaction principles that can help guide constructive and effective interactions between senior leaders, product leaders, and product teams.
The Strategy/Metric/Tactic Lockup
Former Netflix CPO Gibson Biddle explains how to assign metrics and tactics to a product strategy. Part of his series on product strategy.
OUTPUT, OUTCOMES, IMPACT AND KPIS
Jeff Gothelf defines each of these terms to help build a shared understanding of them.
Hope your objectives for the week are clear – and not too demanding!