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Shift IT from projects to products: Part 1- What is a product?

Many organizations engaged in digital transformation agree that the IT department should be a profit center rather than a cost center, a leap only made possible by shifting IT from ‘project thinking’ to ‘product thinking’. In this shift, the first question is what is a digital product and how to draw the boundaries of a product?

Traditional IT project management usually involves IT managers making a detailed plan based on business requirements, gathering required resources and budgets, allocating people, ensuring efficiency and checking progress. This project-centric paradigm brings with it many problems:
  • A lengthy period to turn ideas into reality 
  • An emphasis on sub-tasks and local optimization that compromise overall progress
  • An IT team that is preoccupied with completing tasks with insufficient incentive, resulting in  poor performance
  • Lost continuity of thought and capability building – as if almost every program starts from scratch.

(As shown in Figure 1, only 40% of the capacity is used to add value)

The bigger an organization grows, the larger the challenges of a product-based approach and the more difficult it becomes for the organization to swiftly innovate and respond to disruption.   The good news is that many IT teams are agile in transformation, thinking more of products than projects.

Project vs. Product, what are the essential differences?

An IT project management mindset centers on delivery of a specific result, or fulfilling the contract to develop . The main principles of this framework are project scope, time, budget and efficiency (such as measuring people in terms of their effort). In comparison, product thinking focuses on the bigger picture instead of a single project and aims at considerable and sustainable success for users or clients because even perfectly completed projects may need constant upgrades in an ever-changing market.

(Figure 2: key differences between project and product thinking)

Amid the COVID-19 pandemic, many Internet companies responded to disruptions effectively and even innovated in times of adversity.  Within just 24 hours after identifying the requirement, Meituan Dianping launched “contactless delivery” services that enabled people to have their food delivered without having to interact with the courier, then rolled out the service in key cities within a week.

Such fast, effective response to disruptions and emergencies comes from factors such as efforts in continuous innovation, cross-functional teams united to achieve an objective, decision-making autonomy (allowing members to make decisions in an entrepreneurial climate without too much managerial interference), and iterative and incremental product development. 

Many IT departments today still run on project thinking and act as an independent company within the business. This way of working focuses on meeting requirements of budget control, KPIs and staff utilization, and involves incohesive work specialization and endless review from the leadership. Tracking activities and budgets only provides a false sense of security in a world of dynamic and innovative change. 

First step: What is a digital product?

Even embracing a product mindset in theory, some IT organizations are still faced with many difficult questions, the paramount of which is what is a product. Is this new project a product? How about a new feature to the business? Where do we draw the line? 

Definition of a digital product

Unlike cups or soap which can be tangibly held, a digital product usually has two main characteristics – 

1. Software plays a key role
2. It creates distinct value for a group of people, such as customers and users. 

As illustrated in Figure 3, all digital products – ranging from a mobile app to a website experience to an API – attempt to solve a problem or provide a benefit for a group of people.

(Figure 3: two key components of digital product)

Digital products in many forms 

Here are some examples of digital products used by a large financial enterprise, illustrated from different perspectives. 
  • Organizational positioning: digital products can be used to create value directly by providing benefits (such as online loan services), lowering costs (through an internal video conferencing system), or by facilitating and accelerating the organization’s ability to respond quickly to market (DevOps Platform).
  • Service target: digital products like an e-commerce platform for external customers and users, or an app for the workplace that combines office admin and collaboration functions as is the case with DingTalk.
  • Forms: digital products can come in many forms such as a CRM system, an API service for multiple users and repeat uses, an app, an investment and fundraising platform, or an IoT device.
  • Business models: digital products can create value directly through paid services, licensing fees or internal settlements, or indirectly through flow-in benefits
  • Channels:  a digital product can create value in one or many variants such as a website, Android or iOS app, or software embedded in a physical product. 
  • Scope: As time goes by, digital products may grow or shrink.  For example, a digital product may only process personal deposits at the beginning, support credit card business later, and then partially accommodate corporate clients. At the end, the product may morph into two variants to serve personal and corporate banking differently. 
  • Lifespan: digital products can go through different lifecycle stages from incubation, introduction (even a quick launch to test value), growth, maturity, and replacement (sunset or pivot).

(Graph 4: digital products in different forms)

(Figure 5 outlines the consumer decision journey from awareness to consideration, purchase, aftersales and repeat purchase for digital products across different forms. The touch points are when consumers are open to influence.)

How to determine the boundaries of digital products?

Transitioning from an IT project management mindset to a product-oriented approach is not without challenges and cannot be completed overnight. There’s no doubt that project thinking still works perfectly in some situations, for example when requirements are known and stable, when the target is to sunset or freeze changes, or when changes to the product are out of the organization’s control (e.g. implementation of a 3rd party product with minor customization). 

The transition needs to be gradual, we recommend the follow approach:
  • Identify digital products of critical importance to an organization, such as the top 10 or top 20%, clearly determine and clarify the scope of those products, set up a cross-functional team, and adopt a product-centric delivery method. 
  • After six months to one year, focus on the top 10 or top 20% in the product mentality. 

(Figure 6 illustrates the gradual IT shift: start, one year later, two years later)

The key to determining the boundary of digital products is not about how to reassign team members but instead first determining which products are strategic, then identifying the skills and abilities needed to create value, and follow that by building a group of people with cross functional expertise working toward a common goal.

With the financial enterprise mentioned above as an example, in the first round we identified the top 10 strategic products divided into five types – R (Revenue Generated), E (Engagement & Experience), B (Business Enabler), C (Cost-Saving) and T (Time to Market).

(Figure 7: The top 10 digital products identified)

These products range from systems to touchpoint applications, platforms and API services that span four life cycles stages – from incubation to maturity. As shown in the following table, products can be also divided into three groups with full consideration of a team’s resources and abilities. 

(Figure 8: team capability tracking and matching strategy)

It’s almost inevitable that barriers will be encountered in defining roles and responsibilities in making the shift to product-based teams. To assemble a powerful team with the required skill set, one can start from a lightweight approach, creating a virtual team sitting together in its own office space but retaining the original organizational structure in the early stage. Then step by step, this will lead to the formation of a real cross-functional team. No matter what compromise is made, the priority in this process is to allow development and testing under the umbrella of one team.

It might be easy to understand a digital product, identify those that have strategic importance to the organization and capabilities required. But the list of challenges can be very long, ranging from product-centric working model and practices, product management maturity, progress evaluation, and finally building muscle to have the business responsiveness of a company like Meituan Dianping. We will continue exploration of these topics in the future. 

Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.

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