“A bad process will beat a good person every time” – W. Edwards Deming

Product owners in large organizations seem to have everything: 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 that will create new markets and ecosystems.  Is there something wrong with them? What prevents them from functioning like product owners in start-up companies who quickly release new products in the market with lower budgets?

A few months ago, I wrote a post on Agile Journal about how start-up company product owners are crucial in driving collaboration within and outside the product teams, thereby influencing the organizational culture [1] to create innovative products. This article takes a contrasting view by highlighting the plight of product owners in large- and medium-size organizations. While product owners in start-ups (or start-up-like organizations) have more leadership power and influence, those in medium and large organizations spend a lot of unnecessary time and effort maneuvering the internal politics in order to implement their ideas. The existing organizational culture, politics, and business model all contribute to this conundrum.

According to Clayton Christensen, Harvard Professor and author of The Innovator’s Dilemma, there are three factors that determine what a company can or cannot do [2]:

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.

The capabilities defined by these three factors consistently return results year after year as long as the organization is working in the same domain and confronting similar challenges. 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. There are two different cases where product owners with abundant resources, working in relatively large and stable organizations, are struggling to produce new market-defining products due to a combination of people, processes, and values that brought prior successes to their organizations.  Product owners in most medium and large companies are not in a leadership position where they have the organizational positional power to affect overall culture and develop innovative products that create new markets or ecosystems.

Case 1: A Very Large Multinational Financial Organization
I recently worked with the digital marketing division of a large financial company that wanted to create a rich-media-driven, Web 2.0-enabled website to reach out to its customers. It took the company ten months and almost a million dollars before it launched the first version of its 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 the part of the product owners. What went wrong?

While the product owner team from the marketing division had good intentions 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 appropriate for the product development work, and the people identified to do the work didn’t have the right set of skills. The technology set and team had 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 a set of parameters (utilization of the resources including available staff) different from the product owner 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. As long as there were only business-as-usual requests, allocating technology teams based on availability rather than skill and experience worked out well. And  this process of allocation with the goal to keep all the available staff utilized all the time seemed to be the right thing to do. With competing organizations reaching out with better marketing tools, the product management division performed innovative and quick experiments (that needed specific skills and experience) to find out what worked and what didn’t. And everyone soon found out that the supporting divisions were not geared to provide appropriate talent and leadership to execute on that request. In this case, the product owner never foresaw overcoming the hubris of organizational gridlock in order to build and launch a new product on time.

This is true for most large organizations that rely on existing sets of processes and values to define any work they do.  These processes that have yielded prior success with business as usual hinder the product managers from executing on innovative new products. Product owners in such organizations cannot behave as empowered leaders but end up as victims of the existing organizational culture and processes. Product owners 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 [3] 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 it is changing how and whom it hires to increase its intake of people with entrepreneurial aptitude [4]. 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.  

Obviously, Google shifted its focus from people to processes with this number of employees. This shift in focus included the adoption of a set of processes governing how employees make decisions about hiring, logistics, product management, etc., all while being consistent with the company’s strategic vision. Additionally, Google enabled processes that ensured that teams consistently produce high-quality products year after year, irrespective of who is on the team. So, Google’s core capabilities were transferred from people (cofounders and first few employees) to processes. This resulted in background processes that were stronger than the people to determine which product gets funding and which product initiatives get axed. During this period of growth, Google failed to realize that as long as the organization continued to tackle the same market, it would face similar sorts of challenges and problems. Whereas having a set of processes to manage those challenges originally worked to help the organization grow at scale, those same factors (processes and culture) can inhibit future success.

Google had no problem attracting the right talent as long as it had the coolest product ever. 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 attract 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
Google and the large financial organization are similar in that their current teams are held back by the companies’ existing organizational culture, politics, and business model, which were based on early successes. The organizations grew due to initial successes, and during this growth, they put together a set of processes ensuring that employees could make independent decisions consistent with the companies’ strategic direction and business model. However, these consistent sets of processes also determined what the employees could not do. Over time, the organizations’ capabilities were transferred from their people to their processes, which determined the “way things were supposed to work.”

As these processes became entrenched, they slowly ruined the start-up organizational model and transformed the original entrepreneurial culture in more ways than one. These processes value consistency more than anything else and bind everyone, including the product owners and product managers.

Is 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 unencumbered by age-old processes and values and they will rise and shine like no other. Their accomplishments in these new organizations (start-up-like structures, essentially) will surpass everything else they have ever done. That’s because organizations have capabilities—independent of the people and other resources in them. The key point to remember is that organizations can be very successful, yet still struggle with breaking into new markets or producing innovative products and services because their product owners are stifled by the current organizational culture and business model.

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

References

[1] Kundu, Anupam. “A Tale of Two Product Owners.” Agile Journal, January 2011. http://bitly.com/fQMkXR

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

 [3] West, Dave, and Roy C. Wildeman. “Product Centric Development Is a Hot New Trend.” Forrester Research, December 2009.

 [4] Waters, Richard. “Google Tries New Angle on Hiring.” Financial Times, February 2011. http://t.co/7CPK9bS
 

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