by Anupam Kundu

Product Owners (PO) in large organizations have everything: they have the talented workforce, thicker wallets, well-recognized brand value and the infrastructure to turn a seemingly common sense idea into a spectacular business. Yet they struggle to find the next innovative product which will be able to create new markets and ecosystems. Is there something wrong with them? What is stopping them from functioning like Product Owners in start-up companies who are releasing new products in the market with envying speed and lower budgets?

A few months back I wrote a post on the Agile Journal [i] on how Product Owners in start-up companies, being a part of the leadership team, play a strong role in driving collaboration within and outside the products teams and thereby influence the organizational culture to create innovative products. This article takes a contrasting view by highlighting the plight of the Product Owners in large and medium size organizations; while POs in start-up (or start-up like organizations) have more power and influence as leaders those in medium and large organizations have to spend a lot of unnecessary time and effort to maneuver the internal politics in order to get their ideas to reality. The key reason for this conundrum, more often than all, is the existing organizational culture, politics and business model.

As per Clayton Christensen, renowned Harvard Professor and author of the famous “The Innovator’s Dilemma” there are three factors that determine what a company can do or cannot do [ii]:

  1. Resources (people, machine, designs, products, technologies etc)
  2. Processes (decision protocols, business processes, levels of permissions, patterns of interaction across business units etc.) used by its people to convert resources to business goals
  3. Values (a direct by-product of organizational culture) used by its people to decide on priorities and goals .

As long as the organization is working in the same domain and trying to battle similar challenges, the capabilities defined by these resources, processes and values work fine and return results year after year consistently. However, if the organization wants to explore new horizons and bring innovative products and services to market or create new markets then these very organizational capabilities become constraints. In this article, I share two different cases where Product Owners working in relatively large and stable organizations are struggling to produce new market defining products, despite having access to all the resources they could ever want due to a combination of the factors (people, processes and values) that brought prior successes to these organizations. Through the article, I stress that Product Owners in most medium or large companies are not in a leadership position, where they have the organizational positional power to affect overall culture and develop innovative products that will create new markets or ecosystems.

“A bad process will beat a good person every time” – Edward Deming

Case 1: A very large multinational financial organization

Recently, I was involved in working with the digital marketing division of a large financial company who wanted to create a new, content rich, rich media driven and Web 2.0 enabled website to reach out to its customers. It took them 10 months and almost a million dollars before they launched the first version of their website which apparently didn’t even satisfy the basic usability goals. The firm has large marketing budgets, well trained project managers and good intentions on part of the product owners. What went wrong?

While the PO team from Marketing division had the right intent for the product and worked hard to prepare a roadmap, the same team had no power to influence key factors needed to define, design, build and test the product. The tools used for the product definition, development and testing were not the appropriate for the product development work, the people identified to do the work didn’t have the right set of skills and all these were pre-determined without any consideration of the product being built. The technology-set and team has been “chosen” for the product group by the different business units who look after technology and staffing. These peripheral yet key supporting business units were measured and incentivized on different set of parameters (utilization of the resources including available staff) than the PO team (time to market for innovative products). Thus the assignment of people and other resources to define, design, build and test the product were not in tandem with the optimum skill set and experience required to get the product quickly to the market.

Previously, the supporting key business units only tackled minor enhancement requests from the product management team for the existing systems and the practice of allocation of technology teams based on availability rather than skill and experience worked out well as long as it was business-as-usual requests to keep the lights on. This allocation process was created with the goal to keep all the available staff working.

With competing organizations reaching out with better marketing tools, the product management division was interested in doing innovative, quick experiments (that needs specific skills and experience) to find out what works and what doesn’t. And everyone soon found out that the supporting divisions were not geared up to provide appropriate talent and leadership to execute on that request. In this case, what the Product Owner (PO) never saw coming was the hubris of organizational gridlock that they had to overcome to build and launch a new product on time.

This is true for most large organizations that rely on existing set of processes and values to define any work they do.  These processes have yielded prior success with business-as-usual however hinders the product managers from executing on innovative new products. POs in such organizations cannot behave as empowered leaders but end up as victims of the existing organizational culture and processes; POs are at the mercy of the choices that have been made by the existing organizational practices primarily because they do not have the requisite organization positional power. This is in sharp contrast to the concept of “Product Centric” teams suggested by Forrester [iii] where the focus of the supporting teams is more to cope with the rapid pace of change in the marketplace and produce innovative products in true partnership with the Product Owners.

Case II: Google, Inc

Google recently announced that they are changing how and whom they hire to increase its intake of people with entrepreneurial aptitude [iv]. Google has money, Google has brand, and Google has talent. Then why does Google believe it cannot depend on its existing hiring process to employ the best entrepreneurs? At the end of the day, Google is a product company. Besides the Android marketplace, Adsense is the only product in the Google stable that makes enough money for the company. This news about an improved hiring process indicates that Google doesn’t have enough entrepreneur-like workers who can create spectacular new products and define new market ecosystems that can be monetized. Just think of the number of beta products (for example Google Health, Google Body) on which Google pulled the plug in the last few weeks.

Google is a classic case of a start-up that has become too big (relative to where it started) over time and is slowly losing its once defining entrepreneurial culture. Many pundits are commenting on how Facebook  has become the new Google while Google has become the Microsoft that it once set out to beat. Sergei and Larry’s establishment of Google’s intelligent entrepreneurial culture made Google the most attractive company in the world. From 1995 to 1998, Google had only two employees, which were the cofounders themselves. During this period, Google operated in stealth start-up mode and developed the most innovative search engine in addition to changing the business model for advertising. The success or failure of the product and the company depended on the vision, skills, and tenacity of these two only. From 1998 to now, Google has gained about 30,000 employees.

With this number of employees, the focus obviously shifted from people to processes; adoption of a set of processes that will govern how employees make decisions about hiring, logistics, product management etc., that is consistent with the strategic vision of the company; processes that  ensure teams consistently produce high quality products year after year, irrespective of who is on the team. So the core capabilities of the organization got transferred from people (co-founders and first few employees) to processes. Hence these background processes became stronger than the people to determine which product gets funding, which product initiatives get axed.  Google failed to realize during this period of growth that as long as the organization continues to tackle the same market it will face the same sorts of challenges and problems and having a set of processes to manage and control those challenges will work. But the moment the market shifts and forces the organization to innovate, then those factors (processes and culture) that originally helped the organization to grow at scale can be inhibitors to future success.

As long as Google had the coolest product ever there was no problem with attracting the right talent however with new start-ups like Facebook, Twitter, Zynga, GroupOn and AirBnB making innovative products the talent is walking in a different direction – to places that offer more freedom to build innovative products. The good news is that Google has realized that it can no longer rely on existing hiring practices to hire the talented entrepreneurs to drive its growth; hence the drive to hire the right people to design and build the next generation of innovative products.

Way Forward

In both the cases presented, what is common is that the current teams are held back by the existing organizational culture, politics and business model which was based on early successes. Initial successes lead the organization to grow and during this growth it put together a set of processes to make sure that employees throughout the organization can make independent decisions that are consistent with the strategic direction and business model of the company. However these consistent set of processes also determines what the employees cannot do. Slowly over time, the capabilities of the organization got transferred from its people to its processes which determine the “way things are supposed to work”.
As these processes become entrenched they slowly ruin the start-up organizational model and transform the original entrepreneurial culture in more than one ways; these processes value consistency more than anything else and bind everyone, including the product owners and product managers.

Is actually something wrong with product owners and managers in these medium and large organizations?
The answer is No. Put the same Product Owners in a different organization not encumbered by processes and values contrary to product development, they will rise and shine like no other; their accomplishment in these new organizations (start-ups like structure essentially) will surpass everything else they have ever done before. That’s because organizations themselves—independent of the people and other resources in them—have capabilities. The key point to remember is that organizations can be very successful, have a large globally distributed work-force and high business margin yet they can struggle  in breaking into new markets or produce products and services that will redefine existing markets because their Product Managers/Owners are stifled by the current organizational culture and business model.

So now what happens if such an organization has a challenge to initiate an innovation? Stay tuned.

References

[i] “Tale of Two Product Owners” http://bitly.com/fQMkXR

[ii]Christensen, C. M., and Overdorf, M. (2000) Meeting the Challenge of Disruptive Innovation. Harvard Business Review 78(2):66-76

[iii]Product Centric Development is a Hot New Trend: Forrester Research December 2009. Dave West, Roy C. Wildeman

[iv] “Google tries new angle on Hiring” http://t.co/7CPK9bS

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