Epic Waste

Much has been written about waste at startups.  I started writing about this as far back as 2005 (see Startup Product Management), and this concept is at the core of the Lean Startup movement.

Lately there’s been much talk and ink about waste in government technology projects, with the very disappointing effort to create the national health care marketplace.  The New York Times did a good summary of the mess.   Numbers like $600 million are tossed around.  But of course the opportunity cost is even higher if you believe as I do that the country needed this marketplace.

I don’t have much first-hand experience with government technology efforts, but in reading the reporting, it appears that they did literally everything precisely the opposite of what is considered best practice at leading technology companies.

But the purpose of this article is not to complain about waste in government, or yet more about waste in startups.  What I wanted to try to highlight here, is what I believe is the largest source of waste in technology, and that’s waste in large companies.   I’m not talking about large technology companies like Apple and Amazon and Google, although every company has some waste.  I’m talking about the thousands of large banks, insurance companies, airlines, auto manufacturers, telcos, retailers, health care providers, and entertainment companies, that spend shocking amounts of money on technology every year for such paltry results.

I’ve visited with multiple companies from each of these industries and with precious few exceptions, I find these large “IT” organizations, usually run by CIO’s or CFO’s, and operating with horribly inefficient and ineffective methods.  They are typically using stakeholder-driven roadmaps, project-based funding and staffing, heavy use of contractors and outsourcing, waterfall processes (even when they claim they’re Agile), no effective product role, and minimal if any UX design.  I could go on, but you get the idea.

The amount of waste at these companies is staggering.  The irony is that they often believe they’re actually saving money.  They cite the loaded cost of an outsourced engineer in India or China and point out that it’s a fraction of what that engineer would cost locally.  They don’t understand that their model is requiring much larger teams, and more importantly, they are not able to operate at the speed of innovation (see The Need For Speed).  Because these leaders don’t understand technology they make short-sighted decisions and then struggle to connect the dots between their choices and the poor results.

Fortunately for many of these large companies, they have enough capital to fund several attempts, and also large companies don’t usually die that fast.  It is typically more of a slow death by a thousand cuts.  Some companies bring in new leaders that understand the role of technology, and sometimes these companies can turn things around and give their company new life (see Moving From an IT to a Product Organization).

I don’t mean to sound too negative, but this epic waste does bother me.  Of course, if larger companies weren’t so bad at innovation it would be much harder for the startups.

But if you’re working at a large company, and you see your company running more like the government than the effective product organization you believe is needed, I’m hoping you dedicate your energies in this new year to bringing modern practices to your organization.  Here’s a suggested starting point: Product Discovery in Established Companies