PBM - Reading 1

How the Software Industry Redefines Product Management

Brad Power
Harvard Business Review

Quick, name a product that was developed without using software. It’s difficult, if not
impossible. Software has become a crucial part of almost all goods and services. It’s used to
design and develop just about any product you can think of, from consumer goods to industrial
equipment – or any service or experience ranging from retail customer service interactions to
luxury hotel stays. Likewise it’s central to buying almost anything these days, and is a growing
part of the customer and business experience generally.

But have you thought about the implications of this trend for management practices? The rapid
pace of change in software (e.g., new product releases every day, not every year), has caused an
increasing pressure on product development in other areas, and on management in general, to
change more continuously as well. Indeed, software is emerging as the proving ground for the
future of management practices, the way auto manufacturing used to be the proving ground for
new management practices (think of the Toyota Production System).

For example, I spoke with Andy Singleton, CEO of Assembla, a firm that helps software
development teams build software faster. He told me the story of Staples vs. Amazon. As you
might expect, Staples has a big web application for online ordering. Multi-function teams build
software enhancements that are rolled up into “releases” which are deployed every six weeks.
The developers then pass the releases to the operations group, where the software is tested for
three weeks to make sure the complete system is stable, for a total cycle of nine weeks. This
approach would be considered by most IT experts as “best practice.”

But Amazon has a completely different architecture and management process, which Singleton
calls a “matrix of services.” Amazon has divided their big online ordering application into
thousands of smaller “services.” For example, one service might display a web page, or get
information about a product. A service development team maintains a small number of services,
and releases changes as they become ready. Amazon will release a change about once every 11
seconds, adding up to about 8,000 changes per day. In the time it takes Staples to make one new
release, Amazon has made 300,000 changes. This represents a truly disruptive management and
operating model. Just as Southwest Airlines, for instance, has a low cost, point-to-point operating
model that disrupted its hub-and-spoke competitors, Amazon has a radically different and better
operating model that will crush any competitors who are making one change in nine weeks,
while it is making changes every eleven seconds.

Amazon’s approach of continuous product changes opens new possibilities for sensing and
responding to the market. Singleton told me that in his industry, they call this “data-driven
product management.” He explains, “Product management is transitioning from a process that
involves setting strategy and forecasting response, to a much simpler process where we can
experiment and directly measure the response of customers to product changes.” In traditional
product management, smart people (marketing, engineering, strategy, product managers, R&D)
come up with new products and lob them over the wall to operations to put into production. The
functional silos and serial process breed miscommunication, slowness, and make it hard to fix
problems. Continuous delivery of new software enables experimentation and direct measurement
of the response of customers to product changes, creating integrated teamwork, speed, closeness
to customers, and facilitating quick fixing of problems in real time.

But the implications of this approach clearly go beyond the process changes for product
management (what Singleton calls “Continuous Agile”). The approach naturally entails a faster
management system that will increasingly disrupt traditional management systems based on
hierarchies and command-and-control, which are inherently internally focused and slow. As
Singleton told me, “The technology world is a cult of innovation. We see that innovation drives
success in business, and in the larger economy. Software is an almost-pure form of innovation.
We call it ‘soft’ because we can change it and reshape it easily.”

The software management practice of continuously releasing new product changes is opening up
revolutionary new possibilities for management generally, pointing to a future in which
organizations in almost any industry can deliver a steady stream of breakthrough innovations.