I’ve been spending a good amount of time this past couple of years – and especially the past few weeks – thinking about the root causes of the chasm between the best product companies and the rest.

Most of you know that my writing is intended to be very practical and immediately applicable.  But in this one article, if you’ll bear with me, I need to get just a little philosophical.

It is plain to see the difference between feature teams and empowered product teams.

It is plain to see when companies view teams as there to serve the business, versus when they’re there to serve customers in ways that work for the business.

It is plain to see when a company is just trying to please as many stakeholders as possible, versus when they have a clear and intentional product strategy.

But while these differences might be plain to see, that does not explain why these differences exist.

If we hope to close the gap between the best and the rest, we need to look at the root cause of this gap.

Roughly a decade ago, Marc Andreessen published what I consider one of the most important essays of our time, Why Software Is Eating the World. He described why he believed that technology was about to cause major disruption across virtually every industry.

Marca gave voice to what I had been seeing in my work, primarily with the disruptors, but occasionally with those under threat of disruption.

Ten years later, he was remarkably prescient.

That said, most companies seem to have not really understood his warnings.

Yes, they’re all spending more on software now.

Yes, they’ve (mostly) moved to Agile methods.

But most have not transformed in any meaningful sense, and in particular, most have not embraced technology as the business enabler it is.

The examples of this are unfortunately everywhere.

One of the clearest and most egregious recent examples has to be the absolute ineptitude of the leadership at Boeing with the 737 MAX software at the root of their crisis.

Boeing’s fundamental mistake was to consider this technology as just a necessary cost, rather than the core competency that enables them to provide the safest, most fuel-efficient, and most cost-effective airplanes available.

Rather than staffing an empowered product team continuously working to provide the safest, most fuel-efficient, mission-critical control software, they decided to outsource this technology, thinking they could save a few dollars.

It’s not just the aerospace industry.  The automotive industry has suffered from this mindset for decades, until Tesla came along and proved what is truly possible when technology is at the core of the car, rather than treated as a necessary cost.  Going far beyond navigation and entertainment systems, using technology at its core, and over-the-air updates, a Tesla actually improves over time rather than simply depreciating.

Just as Pixar has shown the film industry what is truly possible when technology is at the core of an animated feature film, rather than a necessary cost.  Pixar uses technology in ways far beyond traditional film-making, and the technology teams are as valued as the creative teams.

The same story is playing out in the insurance, banking, health care, telecommunications, education, agriculture, transportation and defense industries.  You get the idea.

Often when I am having dinner with one of these CEO’s from a company that doesn’t get this, and after listening to them tell me how they’re not a technology company, they’re an insurance company, or a healthcare company, or an agricultural company, I’ll say, let me tell you what I would do if I was a product leader at Amazon or Apple, and we’ve decided to go after your market because we believe it is large and underserved, and that technology is available that enables dramatically better solutions for customers.

After describing how we would set up our teams around the enabling technology in order to optimize for true innovation, putting engineers at the center, I also point out that competitively, we would be betting on them not being able to respond because they would be too busy trying to protect their old business.

It’s not that these CEO’s don’t admire what companies like Amazon and Netflix and others have done; they generally do.  It’s that they don’t see how these lessons apply to them.  They are not understanding what Marc was trying to warn them about.

Of course, there’s many possible reasons why the CEO’s of these companies are so slow to grok this.  Sometimes they have worked in the old world so long that they need much more time to wrap their head around the changes.  Sometimes I can’t help but feel like the CEO’s are fearful of the technology.  Sometimes they just seem to be resisting change.  But these are all just excuses.  The board is supposed to be there to ensure the CEO is able to effectively lead the company.

What is especially ironic is that these companies are almost always spending far more on technology than they need to.  In fact, I’ve never seen the amount of wasted technology investment than I find in these companies that don’t understand the true role of technology.

Rather than outsourcing hundreds or even thousands of mercenary engineers, and providing them roadmaps of features from their stakeholders which rarely generate the necessary business results, I explain to them that they will receive a much greater return from a significantly smaller number of the right employees, that are given business and customer problems to solve, and held accountable to the results.

One way or another, becoming one of the best companies starts with the senior leaders understanding the true and essential role of technology.

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