Companies are not reaping the benefits of their technology teams and see technology as an expensive necessity that adds little value. Yet we see transformations focus on improving and maturing the delivery capability of technology teams, and getting closer collaboration with business. This is happening either as part of an official company-wide digital transformation, or as a technology mandated effort to reduce costs and increase business value.
Beyond agile transformation
Many agile transformations fail. Common reasons include lack of executive support, existing technical complexity and inability to secure resources for cross- functional teams. In many cases in a ‘Waterfall to Agile’ transformation there is a tension between established delivery practices and new practices.
A significant problem is that when stripped down, agile requires cultural and behavioural changes that either do not exist in the company, or that the company struggles to adopt because it is simply too far away from those ideals.
Individuals and interactions over processes and tools
Working software over comprehensive documentation
Customer collaboration over contract negotiation
Responding to change over following a plan
Unless your company is a software product company, software development in itself isn’t the prime source of value, and is instead something that needs to be done well enough to ensure that value is delivered to customers.
Whether its shipping pairs of jeans, selling pharmaceuticals, making cars, or managing property, all these ways to create value for customers rely, in part, on a corporate ability to deliver software solutions well, but software often remains just a link in the value chain.
There are many ways a company can deliver its value without having to develop its own software in house, and large companies with an architecture that bakes in every required component find themselves in a position where technology becomes hugely expensive and slow moving. Often, this is what prompts the adoption of agile practices, as an attempt to address a perceived localised problem with technology.
True digital transformation is about solving broader, systemic, company wide problems, creating new ways to deliver value to customers, and finding more effective ways to utilise the inherently expensive proposition that is technology.
Agile principles come from Lean manufacturing and are based on a philosophy of waste reduction to achieve effectiveness and high quality. There are several kinds of waste but two of the most prominent are:
- Building the wrong thing. Misalignment on what is needed from technology to deliver customer value
- Management overburden. Placing demands on teams for work that does not provide customer value.
Building the wrong thing with pace and high quality is a much bigger problem than iteratively building the right things to a reasonable standard.
The product approach
Many organisational transformations have a broader and more strategic remit, and rtightly so. They adopt a product-centric approach and implement business-wide changes in support of value creation.
Non-product companies can also benefit from a product approach. No matter how a company creates value there are important product techniques that can help do it better.
A primary benefit of a product approach is that value can be easily duplicated and multiplied, providing a platform to scale your business.
In essence a key goal of digital transformation is how to provide value to customers in a way that scales, and creates a platform for company growth. The aim must be to create ways of working that turn technology advances into sources of differentiation and competitive advantage.
A product business has the following characteristics:
- Creates an item of value that can be purchased or licenced
- Produces each item of value for as little cost as possible
- Sells as many of these units of value for as high a price as possible
- Makes it as easy as possible for a customer to get the value.
(Increase customer convenience and decrease the costs of sale).
In a retail context, analytics and machine learning can help identify the needs of certain customer groups and provide them what they are looking for. It can identify buying patterns (in particular, locations and demographics) and ensure that stores are stocked appropriately. New value comes by feeding information back to suppliers whose brands are stocked in the shop, enabling them to tune production and become more price competitive. Understanding customers by using data about their purchase intent and purchase outcome can help to launch new products, and has high potential for driving new revenue streams.
Websites help customers find what they want easily and transact effortlessly. Effective web experiences build engagement and relevance with customers, and retain your online presence as the ‘goto’ place in their mind, in what has become an attention economy.
Use of APIs (application programming interfaces) with partners can help reap the benefits of wider marketplaces that allow smaller retailers to sell under your brand and via your eCommerce platform, or to distribute your own product via other digital platforms. Being a specialised, recognised player in a network bring benefits of network effects, and has been the source of new breeds of technology and API only companies.
Even if the end-product that is purchased or rented by a customer is not a technology one, by planning technology investments with a view to improving each of the above product characteristics will help a company move toward a more effective and less expensive use of technology.
Cultivating a value proposition
Lack of delivery pace and poor quality clearly needs urgent focus and rectification to get technology teams working as effectively as possible. Often an extended period of intense delivery focus results in a lack of attention to core capabilities, accumulation of technical debt and complexity, and systemic problems that are harder to unravel.
More often that not these early conversations turn into wider and more strategic discussions about what capabilities are needed, the current state of readiness to achieve this, and the longer term enablement plans that go beyond immediate, but important, deliveries. A balance needs to be agreed between short-term fixes and longer-term foundational activity.
In many cases teams have been working hard, often in less than ideal circumstances, hampered by wider organisational problems that remain unaddressed, and seeing their effectiveness decline, despite working harder than ever. People burn out, lose interest, and move on when they can't utilise their problem-solving skills. especially when the onus is delivery of a poorly though through venture at any cost. Turnover and instability leads to situations in which achieving the basics of a delivery becomes incredibly difficult, and executive stakeholders are right to be concerned about mounting costs, and perceived lack of progress.
In these cases engineering and technology teams have become separated from the business, and are expending huge effort and cost just to remain where they are. As the lack of alignment between strategic plans and technology capability widens, it can be addressed by adopting a product-oriented approach, and clarifying the value proposition for the technology component of the overall solution.
Often the desire to see a more rapid pace of delivery arises from confusing activity and value. The first is easy to measure, but the second very tricky. More people, and more activity do not automatically translate into more value. But they do automatically translate into more cost, and a diminished perception of value.
A key goal of digital transformation, and adopting product thinking, is providing value to customers in a way that scales, and creates a platform for company growth. In basic financial terms, it's finding a way to achieve revenue growth without associated increases in operating costs that undermine profitability.
Value doesn't come from the amount of projects undertaken. It comes from the ability to deliver those projects with minimal cost that comes from having built the right infrastructure, teams, working practices and technologies. In some cases this can go as far a turning the entire company into a technology-enabled platform.
The challenge is often levelled that technology teams are not delivering effectively, with high costs and lengthy project timescales, which impact the company's overall profitability.
It is a common mistake to start a digital transformation with addressing how technology is delivered in an attempt to rectify problems at the point where the rest of the business perceive they are manifest. Engineering-led transformation must work across the following facets of the business, and should be viewed as a journey rather than as an initiative with a start and end.
- Strategy alignment
- Senior stakeholder buy in
- Architecture and Technology Strategy (as is, to be and migration)
- Teams and Operating Model
- Outcomes and Value Proposition
Over many years, technology debt accrues, and efforts to minimise costs by careful management of a central pool of technology resources (people) rarely has the desired effect. There is often no concept of teams working on common themes, and a lack of focus on the end outcome.
Accountability becomes a problem as a 'resource' is drafted onto a project for 'a few days' to do a particular item of work, then be pulled away to another project when done. Fluctuating demand leads to a high percentage wasted ram-up time, the hiring of contract staff whose knowledge leaves with them, and overall higher costs than were necessary.
The result is invariably duplicated work, and duplicated costs to provide the same value to more than one customer. In short, lots of waste, and an unclear view on priorities and where customer value is coming from.
A technology maturity assessment can help. As can breaking apart the shared service function, lessening management overhead associated with endless resource management, and identifying leaders and engineers who will form cross- functional, domain-specific development teams that are already in the opex headcount and budget of each business unit.
A small enablement team consisting of Architecture, Product, Engineering and Agile leaders may be formed to set standards and ensure that capabilities are continually improved across all disciplines.
The result will be greater confidence in planning and execution of delivery work, the adoption of effective technology practices and the building of business domain expertise across technology teams.
This imaginary organisation may not yet a fully digital company and may never need to be one, but it a short period of time it will embrace platforms, products and agile behaviours instead of its capex funded bespoke projects. Things are looking good for further growth.
What does it mean to ‘Go Product’?
A shift to becoming a product-led company means establishing product thinking and product leadership that promote the following changes:
- From bespoke to repeatable
- From satisfying an immediate customer to satisfying as many customers as possible
- Minimising duplication and variation
- Understanding customers needs
- Understanding business opportunities from technology
- Establishing value propositions that inform road-map and delivery priorties
- More value with less effort.
While your companies may not see itself as a product company, if it uses technology to any degree to try to build an advantage, a product-led transformation approach is well worth considering.
If you'd like help with adding a product-led beginning to your customer-centric approach, then Aston Beck are well placed to assist.Get in touch