Product Meta-Models

Delivering business agility through a new perspective on technology

Peter Evans-Greenwood peter@evans-greenwood.com

Introduction

Imagine the future. Not the distant future, we’re talkingabout next week or maybe the week after rather than aneventual future where we all have flying cars. A new business competitor has emerged on the market, comingout of nowhere with a business model that makes itimpossible for your company to compete. They havehalf the

cost to serve

of their competitors, half the

timeto revenue

, they seem to be able to introduce a new product in a matter of days rather than weeks, and their products are incredibly customisable. They seem to havehalved the business metrics that you want to go down,doubled the ones you want to go up, while as the sametime supporting a product portfolio of impressive depthand complexity. And they claim to be able to do this withconventional technology. How did they do it? And howare you going to respond?

Complex products

A number of industries have what we can consider complex products. Companies in these industries sellservices that we can package and repackaged in a hugenumber of ways. While the core product, the basicservice, offered in these industries might be quite simple,the potential to combine and recombine the basic product creates an overabundance of possible productsoffered to customers.Logistics companies might offer

express

freight

air

sea

next available flight, reverse logistics

, all of whichcan be boiled down to

move box

. Similarly,telecommunications is based on

call minutes

or, morerecently,

move bits,

which is packaged into

prepaid

off- peak plans

mobile roaming

, …

Finance

might havestarted as

pay interest

, has been focused on

manage risk

for some time, and seems to be evolving into

connecting customers with markets

, but offers a broad range of products to customers, such as

credit cards

fixed

and

variable mortgages

personal loans

.There is nearly an infinite number of ways to packagethese simple core products and offer them to the market.Packaged products can be defined in terms of the toolsused to provide them, creating a distinction betweenground and air freight for example. Or they can be aredefined in terms of the capability they provide, such asdistinguishing between overnight, express and standarddelivery. We might also collect a group of synergistic products together, offering them as a bundle.What has been common until now is that the definitionof complex products has been guided by our ability todeliver them. As our capabilities have grown so has thenumber of product options available to us. Theincreasing complexity of our products is driving up thecost of service delivery, making the ability to rapidly andefficiently evolve our IT estate is key to success intoday’s rapidly changing markets.

A generation of product facing systems

Today we have so many options that product definition iteffectively arbitrary. A product is created to meet adefined need or in response to a customer request, andthen baked into our IT systems so that it can be offered,delivered and billed. The result is a generation of product facing IT solutions: applications defined in termof the products they support rather than their role in the business. For example, it's now common to havemultiple billing solutions in operation, each solutionsupporting a small numbers of products and replicating90% of the functionality of other solutions. We need somany billing solutions as each solution is only capableof rating a few products. We see similar problems whenwe look at other areas of the business, such as sales andoperations.This approach to defining and realising products isconstraining the business. Products are difficult tochange, as change often requires a major investment inIT to update applications across the full width of the business. What do we do if a product is wrong, doesn’tmeet customer requirements, and needs to be tweaked?What happens when we need to react to a product acompetitor has just released?It is also challenging to manage the huge number of options and possibilities available to create new products. Companies find themselves on one of tworoutes. A single, inflexible product is defined and offeredto the market—“You can choose any you like, as long asit's black”—at the cost of missed opportunities in themarket and the inability to react to competitors. Or they’re forced into selling bespoke products; eachdesigned to support a single customer, incurring a highcost of sale, high support costs, and which are oftenunprofitable.

A complexity continuum

We can easily imagine a complex product continuum. Atone end is the single, static product; the model T of our industry. At the other is chaos, where each client has anindividually tailored product.What we need is a way to control the chaos. We need away to define the moving parts for our products, creatinga framework segregating the areas where we want toallow customisation from those we want to standardise.By providing some structure, but not too much, we cancreate an environment where out sales team isempowered to adjust the product to meet a customer'sspecific needs, while providing operations with stabletarget to support. The right framework can act as anengine for innovation within product management by providing them with a suite of components that can be

reused, updated, redefined or recombined to create a rich palette of new product offerings. And finally, and possibly most importantly, finance can use theframework as a tool to establish the real cost of each product offering, allowing them to ensure that sold products are profitable (unless we choose to sell a selectclient an unprofitable product under exceptionalcircumstances, in which case we know just how muchthe exception will cost).There are precedents for this in the physical world.During the early to mid nineties the development of flexible manufacturing systems enabled somemanufactures to offer mass customised products for thefirst time

. First to market were manufactures withsmall, simple products such as bicycles. The product wasdivided into a number of discrete components—frontwheel, back wheel, gear assembly, frame, seat,handlebars, etc.—allowing customers to assemble their own bicycle by selecting the versions of each componentthey prefer. A few product rules, governing howcomponents can be combined, ensure that the result wasa fully functioning bicycle.Flexible manufacturing techniques quickly moved intomore com plex and expensive products. Today, the car you order from the local dealer may be built to order ona production line in another country. Car manufactureshave made a science of using their product model tolower costs by sharing components between models, aswell as driving innovation by quickly creating conceptcars through recombining existing components withsome new elements.Thinking about our products in terms of reusablecomponents allows us to find the middle ground. Acomponent based approach reigns in the chaos by providing structure, limiting the number of moving partswithin a product to a manageable number. The number of moving parts, how granular we make our productcomponents, is a slider that can be set somewhere on the product continuum between complete chaos and a single product with no options.

The product meta-model

By now we all agree the structure (the right amount of structure, but not too much) in our product is a goodthing. We might even establish a strategic initiative tocapture and leverage this structure. As with all strategicinitiatives, defining our goal is easy—the real challengeis in execution.Our first step is to formalise our approach to creating product components in a product meta-model. The meta-model is not a product model (as a

product

model isreally a description of a single product type), but amodel which defines what we mean by product—amodel about a model.Take our flexible bicycle manufacturer. The racing bike product model describes a racing bike: two differentchoices in wheels with skinny tires, three different seats,two different racing frames, handlebars and optionalelbow rests. We might also have models for mountainand hybrid bicycles. The product meta-model describeswhat it is to be a bicycle, and provides the foundation for our product models: a bike has two wheels, frame, seat, breaks, and so on. Our factory can assemble anythingthat meets the bicycle meta-model, but the real worldrestrictions of manufacturing (the number of different parts we can stock, available space in the catalogue ...)mean that we only want to offer a relatively smallnumber of product models compared to what is possible.The granularity of the product meta-model determineswhere we have set the slider on the complexitycontinuum: the more fine-grained we make the model,the more control we have in customising products, but atthe cost of additional complexity in defining and supportindividual products. We need to structure our productmeta-model to enable the amount of innovation andflexibility required, while minimising the effort to defineand field new product models.The second step is to capture business rules for the meta-model. These rules specify how different elements of the product meta-model may be combined, such asmandating that every bicycle must comprise two wheels,a frame, seat, handlebars and drive train. The alsospecify dependencies between elements, such as therequirements that the two wheels must be of the sametype and must match the frame.We can easily imagine applying the same approach toany of the complex product industries. The model for alogistics company will specify two end-points andinclude attributes to capture the type of service offeredand its service level. All

move box

products can be thenmapped to this model. Finance could create a mortgagemodel, capable of representing any loan that is securedagainst an asset (or set of assets), with different types of mortgages (fixed interest, flexible interest …) mapped to

1 B. Joseph Pine,

Mass Customization: The New Frontier in Business Competition

, Harvard Business School Press, ISBN: 0875849466

A complexity continuum A product meta-model

the model. And telecommunications can create a modelthat captures the ability to deliver data to a device, or between two devices, with mobile calls, home phone andVPNs mapped to the model.

Bringing stake holders together

Creating a meta-model for our products is just the tip of the iceberg though. By creating a formal definition of our product we’ve formed the nucleus for a sharedunderstanding of our product. We can use thisunderstanding to bring together stake holders across our organisation, accelerating collaboration by creating acommon product taxonomy and language.Extending our meta-model to include departmentalconcerns, we create a common framework to share our understanding of the products we support. Marketing,for example, might extend the core product meta-modelto capture how products will be offered to the market,showing how the product will be differentiated. Financewill focus on extending the model to capture howofferings will be priced and how these prices will beassociated with customers and accounts. Operations willextend the model to capture the detailed technicalinformation required to configure, create and deliver the product, while Product Management will use the core product meta-model, with input from customers and theother departments, to determine what configurationoptions should be offered.

Controlling the chaos?

A product meta-model is a tool to help us manage thecomplexity we typically face in taking complex productsto market. Rather than being forced to one end of thecomplexity continuum—either offering a small number of tightly constrained products to the market, or unleashing sales to create bespoke solutions which maynot be profitable—we can used the product meta-modelto structure our operations, streamlining them toaccelerate adoption and to set the slider somewhere inthe middle, somewhere where we choose it to be.The meta-model facilitates conversations betweendepartments by ensuring that all stake holders are

Bringing stake holders together

Marketing FinanceProductManagementOperationsProduct

working from the same basic assumptions. If Marketingand Product Management jointly decide to update the product in a way that changes the core model, then thesechanges can be measured against the core meta-modeland reflected into the extended models developed for Operations and Finance.Adding support for tandem bikes, for example, wouldrequire the core model to be updated to support a bikewith two seats and a more complex drive train. Thesechanges are then reflected into the Operational andFinance models to determine the changes the impact of supporting the new model across the business. Thisinformation can be used by the stake holders as a groupto make an informed decision on the viability of the new products this change enables.Similarly, Marketing, Finance and Sales can use themeta-model as a common point from which to determinehow much freedom Sales has is configuring and pricingsolutions for customers, providing us with a simplethree-tiered approach:1.Any solution constructed within the meta-model iseasily priced, offered to a customer, as its costs arewell known. This allows us to provide Sales withcomplete freedom to work within the meta-modelwhen constructing a customer solution.2.Solutions that require new product components—anew type of wheel, for example—will incur anadditional but easily quantifiable cost. A light-weightapproval process can be used to determine the costand ensure the opportunity justifies it.3.Completely bespoke solutions—leveraging existingand new components in the construction of acompletely custom solution—are still possible. Inthis case the meta-model provides us with a toolkit tosimplify the design and costing of the customsolution. While (potentially) expensive, a customsolution might be justified in some circumstances for strategically important clients. A more onerousapproval process can be used to ensure that customsolutions are only offered when the opportunity justifies it.Product meta-models provide business, sales andoperations with a common yard stick. By measuring our plans against this yard-stick we can ensure thatconversations are grounded in fact, and drive them tosuccessful and informed conclusions, enabling us tomanage our complex product environment.

Developing differentiation

At a high level we can expect a product meta-model to be common across an industry as we're all working withthe same basic moving parts. If we’re all sellingessentially the same product then we can expect our core product meta-models to be similar, if not the same.To establish differentiation we need to look at how weextend the core meta-model, capturing how we price our offerings, or how we assemble (and reassemble) our products from the components through to how manydifferent versions of components we plans to offer.Extending the core meta-model forces us to answer some basic questions about how we intend to manage