Concerned with the impact of digital disruption to bottom lines and share prices, CEOs and boards have been pushing enterprise IT teams to step up to the challenge and deliver business results. Research firm IDC reports that by 2019, $1.7 trillion dollars will be spent annually on such digital transformation efforts. According to research firm Gartner’s report “From Projects to Products,” “84 percent of CEOs expect digital initiatives to increase profit margins, and more than 50 percent of CEOs say that their industries will be digitally transformed.”
Google’s Apigee team has worked with hundreds of customers across industries worldwide, and we’ve observed an important change that many organizations must make for their investments in digital to pay off—adoption of an IT product mindset.
More enterprises leaders are starting to understand that navigating this shift is a priority; according to Gartner, by 2020, “three-quarters of digital business leaders will have ‘pivoted’ from a project to product portfolio management, up from the one-half that have already done so.”
But urgency doesn’t always translate into effective action; despite all the investment around digital transformation, IDC notes that 59 percent of firms have found themselves at a point of “digital impasse.” Certainly, all the transformation efforts haven’t stopped stock market realignments when a company such as Amazon shows interest in a new industry.
To help businesses on their journey, here, using examples drawn from our customers, are three hallmarks of the IT product mindset that we’ve observed—and advice for adopting them.
The Hallmarks of Product Mindset
Customer Experience Focus
The first hallmark of a product mindset is a focus on the customer’s experience. While a project can be considered “successfully delivered” even if it has no impact, a product’s success or failure is defined by whether or not it is adopted by customers.
This dynamic is acutely felt in the world of software products and applications. The user’s experience of the product and associated brand is wholly defined by the success of the user’s interaction with the interface, whether it be a screen, digital assistant or device. That’s why number one on Google’s famous “Ten things we know to be true” is, “Focus on the user and all else will follow.”
Established companies that want to adopt this focus may need to work hard to rethink their products, processes, and customers experiences from the “outside-in.” Rather than relying on internal intuition, aging development roadmaps created months ago, and other “inside-out” mechanisms, these companies let customer feedback and data guide development in real-time.
IT can be a complex process—but it starts with developing the right channels with which to interact with customers and investing in the right metrics. When Australian telecommunications company Telstra wanted to increase the number of developers innovating around its services, for example, it launched a developer portal that made those services accessible via productized application programming interfaces, or APIs. In the project-minded world, the number of APIs a team produced has traditionally been one of the chief metrics. But Telstra found that it derived value not by tracking project completion but by analyzing how developers were using its API products.
“When we started out with our API program, we were looking at how many APIs we were producing and how many developers were registering on our portal. I think we’ve learned that it wasn’t so much how many things we got out but the quality of the metrics,” said David Freeman, general manager of API enablement at Telstra, during an interview earlier this year at the “I Love APIs” conference in Sydney.
“Now we’re looking at things like revenue because our program is mature and we’re monetizing. We’re looking at the [number] of developers that sign up and the amount of reuse of those APIs and how they’re being taken up,” he added.
Speed to Market
The product mindset assumes that each day a product is delay is a day of lost insights—and a potential gift to competitors. Consequently, the mindset dictates that it is better to get to market early with a minimum viable product than to waste time prematurely optimizing. This approach allows a company to quickly test the basic assumptions behind its offering, and then to layer in additional features and functionality as the product gains adoption and the organization gathers feedback from the market.
By contrast, a project mindset attempts to gather all requirements, including edge use cases, far in advance of putting the product in users’ hands. Frequently, this approach results in projects bogged down in size and scope. Months or even years can pass before these projects see the light of day, and adjustments to the project roadmap can be difficult, labor-intensive, and time-consuming to implement.
Six-decade-old Brazilian retailer Magazine Luiza is an excellent example of the benefits a company can enjoy when it employs a product-minded, outside-in focus on speed to market in IT. The company is in the midst of massive growth triggered by its business transformation investments—namely LuizaLabs, the digital team responsible for quickly bringing new services and customer experiences to market.
Leveraging collaborative communication software, APIs, microservices, and hybrid cloud technologies, Magazine Luiza has increased its software delivery speed from eight deployments per month to more than 40 per day. Because of this massive increase in speed, LuizaLabs has been able to replatform the company’s mobile and e-commerce sites; introduce a dozen apps that have helped store employees reduce the time customers spend in stores before making a purchase; refactored their logistics and delivery organizations in order to offer two-day delivery and in-store pick-up; and launched a third-party marketplace that has not only added over 400 merchants and 1.5M SKUs to the company’s e-commerce product offering but also improved margins.
Product Maturity Through Iteration
Great products are the result of creating feedback loops with users that fuel a process of iteration. Through this ongoing process of hypothesizing, testing, and discovery, product managers may gain insights to groom a backlog of features and make decisions to scale up or shut down features—or products themselves.
Unlike products, projects typically have a start date and an end date. If an organization needs to iterate on the project’s deliverables, it typically has to assemble a new team, secure additional funding, and navigate onerous procedures. And if the team needs to change scope during production, the project is typically governed by heavy processes that make doing so laborious and time-consuming.
Pitney Bowes was almost a century old when, in 2016, it launched its Commerce Cloud: a modern platform that not only lets the company directly sell its software to customers but also allows the company to quickly update their offerings while minimizing impact to users. To support this effort, Pitney Bowes has had to adjust its operating model to enable continued funding and support for these software products. Today, thanks to its customer-focused approach, the company brings new software-as-a-service products to market up to four times faster than it did just a few years ago; can easily push new services to customers; and serves billions of transactions, built by hundreds of developers, that generate millions of dollars in revenue.
Embrace the IT Product Mindset
Given the pressures businesses now face—whether from the market, expectant boards or digitally-empowered customers—it is clear the project-minded operational models of the past don’t meet the demands of today’s market. We’ve observed that many companies that are moving the needle with digital are viewing the services they provide as ongoing, evolving products—and they are building their operational models to encourage those evolutions to happen fast.
As companies embark on this journey, we encourage them to remember:
- Focus on Customers. Customer feedback, rather than untested assumptions, should guide product development.
- Move Fast! Release minimum viable products to test new businesses. Months spent on premature optimization are months of lost insight.
- Mature products through iteration. Establish an operational model and development cadence that can rapidly improve customer experiences. Heavy governance processes can’t keep pace with modern business.
John Rethans, Head of Digital Transformation Strategy at Apigee
Image Credit: SFIO CRACHO / Shutterstock