Moving from an IT to a Product Organization

Quite a few companies that exist today began life as something other than a product or Internet software company. Perhaps your company began as a large brick-and-mortar retailer, or an airline, or a financial services company.

While it is true that these companies all create lots of software to run their businesses, typically these companies are not set up to produce the type of software that they depend on for their business today.

For example, the retailer creates (or buys) software to coordinate and manage inventory, distribution, billing, and point of sale systems. And the airlines write software to manage the logistics involved in flights, crews, reservations, payment, and fleet maintenance. And the financial servicescompany writes software to manage their customer’s assets and investments.

But over the past 10 years, virtually all of these companies as well as those from dozens of other industries have realized that they need to use the Internet to engage directly with their customers online.

Today most retailers also sell their goods directly to consumers online. Most users book and purchase their air travel online directly through the airline’s site or through a reseller’s site. And nearly all financial services companies let their customers manage assets and trade directly via real-time financial sites.

I don’t need to tell anyone that reads these articles how fundamentally the Internet has transformed businesses.

However, many of these companies are trying to manage this new customer-facing internet software as if it were their internal-facing IT software, and the result is that many of these companies provide terrible online customer experiences, and worse, they don’t have the organization, people or processes in place to improve them.

I run into this often, especially when I am outside of Silicon Valley, and when I am in Europe or Asia or Australia, I find this case to be the norm. I’ll be brought into a company and they often don’t have product managers or user experience designers – they generally do have project managers, andmaybe some form of “business analyst,” and of course IT developers, and they all usually report into a CIO. Sometimes I even find that the company has been outsourcing “the website” to external agencies to design and run.

To be clear, when I say “product organization” I am referring to a software organization that creates products and services for end-customers (thousands to millions), and not just employees and partners.

Why is product software so different than IT software? Several reasons: you pay your employees to work at your company and use the software you tell them they need to use; in contrast, in product software, every user makes his own purchase decision – if they don’t want it, they won’t use it. Further, with your own employees you can get away with requiring training courses, reading manuals, and specialized professional services; in contrast, in product software, if users can’t figure out how to use your software they are a click away from your competitor. For IT software, you measure scale and simultaneous usage in the hundreds of users; in contrast, with product software, it’s in the hundreds of thousands or often millions of users. For IT software, if there is an issue with the software, they are your employees and they are forced to deal with it; for product software, an issue such as an outage disrupts revenue and immediately gets the attention of the CEO and often the press.

The truth is that most product software has a much higher bar in terms of the definition, design, implementation, testing, deployment and support than is necessary than most IT software. It’s also true that salaries usually reflect this. Finding people with the necessary product software experience is much harder than finding IT experience.

To help these IT organizations, in this article I wanted to highlight the typical changes that are needed to evolve an IT organization to an effective software product organization.

1) First draw a clear line between customer-facing software and internal software. The demands are different, the skills needed are different, and you will find you need different staff, processes and resources. Don’t get me wrong – both are important, but they are very different and most of your focus must be on your product software. If you can outsource or buy off-the-shelf any of your true IT software (internal-facing software) you should do so, so that you can put your best people, time and mind-share on the customer-facing software.

2) You will need product managers to represent the needs of your target users and lead the product discovery effort. You probably already have project managers, but if not, you’ll need project managers too, just don’t make the mistake of trying to hire one person to cover project management and product management.

3) You will need user experience designers, especially interaction designers, because designing software that doesn’t require hand-holding or a training course is hard.

4) You will need to hire engineers and web developers that understand the demands of large-scale, highly available software, and how it is different than “enterprise software.” While you may yourself be an “enterprise,” that term is referring to your IT organization and not your product organization, where you are trying to create something very different and much harder.

5) You will need QA engineers, because you will need to ensure that your software runs in the range of user environments, and under load, and outages that stop revenue from coming in are much worse than those that slow down your own employees.

6) You will need site operations staff including site security because keeping your site operational 7x24x365 is very difficult and requires special skills and processes.

7) You will likely need to revisit your software development processes from planning through to launch, as the needs of product software are so different from IT software.

8) You will need an online marketing organization. Getting people to your site is not easy in today’s search-engine-driven world, and this is a competency that many IT organizations have not realized they needed.

9) You will need to reprioritize your efforts around the fact that this customer-facing experience that allows users to directly engage to buy or use the products or services of your company is not something superficial – it needs to become a core competency of your company. This is not something to pass off to external agencies.

10) Determine your key business metrics, instrument your site, study the daily reports religiously, and then drive relentlessly to improve the key metrics.

If you don’t yet know what any of the roles or processes I referred to are, you can find out about each of these from the articles at www.svpg.com/articles.

A note of warning: there is a very large, established and lucrative industry around assisting IT organizations (especially professional services companies and agencies). Unfortunately, most of these organizations don’t understand the differences for product software either, which just causes this problem to perpetuate. In fairness, the vast majority of software out there is still custom, IT software, and these firms can help greatly in creating that software. But product software is a different animal entirely, so keep that in mind when talking to these firms.

For many companies establishing a true product software competency is the most important thing for them to be doing to ensure their survival, yet surprisingly some of them don’t even realize they have the problem. They assume that “software is software” and the same guys that managed their SAP implementation for them shouldn’t have too much trouble getting something going on the web. If you are at one of these companies, hopefully you can encourage your management to consider the ten steps above and see if you can’t get things to improve.