The three mistakes of digital product organizations

The three mistakes of digital product organizations

According to a recent HBR blog post 72% of all new products don’t meet their revenue targets. We think Digital Product Organizations can do much better than that.

Most new products (and companies) fail. The odds are against you. Around 75% of venture-backed startups fail. Anywhere from 40% to 90% of new products fail to gain significant market adoption.

On a smaller scale, the problem is the same. Most of our ideas don’t increase value for customers or companies. Among companies like Microsoft, Amazon or Netflix failure rate is between 50% and 70%.

Is this because we are stupid? No, this is a combination of wrong processes, wrong structures and wrong thinking. However, for companies such as Microsoft, Amazon and Netflix failure is not a problem, because they have a culture or experimentation. The problem with failure is the cost of failure and the associated learning. A high rate of failure is normal, what is really important are cost, duration and learnings acquired.

If you are not able to organize in a way, that you can iteratively and incrementally evolve a business idea into a sustainable and scalable business model by experimenting and incrementally funding it, you have a problem.

There are three key mistakes most digital product organizations make regardless of age or industry:

  1. The wrong structure
  2. The wrong process
  3. The wrong people

The Wrong Structure

Companies grow by adding hierarchy and bureaucracy and splitting into specialized units, while forgetting what brought their initial success.

The first principle of Lean Thinking is: Define Value. Second is organize in Value Streams, third is Enable Flow, the fourth is Implement Pull and the fifth is Seek Perfection.

What most companies forget as they grow is to focus on value and organize to deliver value fast to customers. And, this is exactly what you have to do either if you are growing or if you grew so big you are no longer competitive and innovative.

Digital product organizations who want to lead their markets must structure themselves with autonomous end-to-end teams responsible for a product or line of products.

The Wrong Process

Two of the principles Agile is based upon are: satisfying the customer through early and continuous delivery of valuable software and the principle that working software is the primary measure of progress.

This is ok, but only if your teams are mindless feature factories disconnected from customers and strategy. Also know as Delivery Teams. Teams that are disconnected from the customer and the business and they just deliver iteratively and incrementally what they are told to.

The right approach means taking a higher perspective and understanding the mission of a team must be developing a business model or achieving a business objetive. This includes going from idea to execution, exploration and validation. It means designing a business model and a product to deliver.

The Wrong People

In our previous post we already explained why it was so difficult to find great Product Owners in the market and how that is becoming an increasing pattern. 

Putting the wrong person in charge of a product is a huge mistake. But, another mistake companies make is assuming that Scrum Masters or Agile Coaches can help an inexperienced or unskilled Product Owner become a great Product Owner. Why? Because, essentially, most Scrum Masters and Agile Coaches lack exactly the same skills and experience required for a modern Product Owner to succeed.

Scrum, Kanban and Agile are great at improving operational effectiveness. Agile it is very good at improving delivery. However, Agile doesn’t know anything about developing a business model, doing market research, iterating an MVP or doing customer development. The techniques and practices required to explore and validate an idea until it is ready for execution are far away from most professionals in the Agile space.

Our Approach to Digital Product Organization

What we suggest is that you should think of a Product Owner as a Product Manager with modern skills like Lean Startup, Behavioral Economics, Customer Development, Analytics and Innovation.

Once you organize around products, what you have to do is put in charge a competent Product Owner that can drive business growth. But, getting such experience in the market is difficult, time consuming and very expensive. So, we have designed a program that will enable you to grow great Product Owners in your own company with the help of our expert product coaches and consultants, saving you time, money and headaches.