The business model followed by most of the companies in the IT/Software industry generally falls in to either of the following (or a combination or varying flavors of these):
- Create/Sell Product(s)
- Provide/Sell Service(s)
Based on the model the organization follows, they fall into one of the two broad categories of ‘Product Companies’ or ‘Service Providers’. It is true that the distinct line that defines a Product vs. Service company is getting more and more blurred as some of the key product companies themselves (Oracle, Microsoft, IBM etc for example) are engaging in both models within a single ‘roof’. However, this distinction still may be relevant for individual ‘organizations’ or ‘entities’ within a parent company based on their charter and the model they are engaged in. The word ‘Service’, off late, has been burdened with a lot of different ‘things’, even within the limited terrain of IT parlance. The implication varies significantly as evident from the ‘Service’ word in ‘Service Industry’ versus in ‘Service Oriented Architecture’ (SOA). Functionalities which are low-end and support in nature like network administration, PC maintenance, other IT infrastructure related functions etc. are clubbed as ‘Services’ and the companies offering these services generally are dubbed as ‘Service Providers’. Some organizations also have taken this a step further by adhering to ‘Service Subscription’ model, with the software products being leased against annual subscription or subscribing to a ‘total support service’ package as in the case of ‘One Care’ package offered by Microsoft. On the higher end of this family, there exist organizations which provide project execution services or in some cases, even core product development engineering services for clients. The key organizational characteristic or the ‘Organizational Mindset’ of a Service Company evolves from the search for achieving maximum ‘execution efficiency’. The focus is on achieving maximum efficiency for project execution in terms of producing best results within the constraints. The teams are oriented in terms of projects, mostly one-off, turn-key type projects the companies execute for their clients and, the motivation there is to complete projects within the specified constraints in terms of time, scope, resources and quality standards. The organization would be more customer-centric (most of the projects being customer funded ones) and the success is assessed in terms of customer satisfaction and repeat business referrals. The scope of work is tightly defined within the boundaries of the project, with the project coming to a logical culmination when the software systems are delivered to the client (or installed at the client site). The mindset in such organizations is generally more towards ‘execution efficiency’ against what I would call ‘innovation efficiency’, which is the earmark of a product company. Product Companies typically follow a business model that is aligned with the objectives for successfully creating and selling specific products. Identities (brand) and ‘pride’ of such organizations remains closely attached to their flagship products out there in the market. To grow and sustain the said identities and intellectual assets, the Product Companies model their operations based on a different business paradigm in comparison with the Service Industry. The core organizational characteristic of a Product Company need to evolve around achieving maximum innovation efficiency, which reflects the strategic focus of the organization towards promoting and driving continuous product innovation in search of key market differentiators against competitions. They are more product-centric than customer-centric. The success is assessed by the product market and the stress is to expand the market reach and brand awareness of the product. The ‘Product Mindset’ asks for developing expertise around specific verticals or product areas and drive innovation in the respective specialized areas by the respective teams, both in terms of feature sets and the technology. The teams are formed around product areas and relevant expertise and they continue to be associated with their respective product areas for relatively longer periods. This helps the teams to develop ‘pride of ownership’ and it allows the teams to be forward thinking in terms of current and future planning. It is very critical that various teams responsible for different product areas stay connected. Thus the organizational culture and the work environment should be oriented towards encouraging high level of interactions between teams to avoid formation of silos. A culture that is very open in terms of absence of or very minimal existence of hierarchical and formal bureaucratic roadblocks, in terms of nurturing and valuing creativity, in terms of facilitating idea exchange within and across teams and in terms of providing an atmosphere that promote free flow of ideas would be a key contributing factor to the success of a product company. And, the ‘Product Mindset’ is the sum total of these set of values, thinking, practices and the enabling work culture that would be an integral part of any creative and successful product development environment. Some of the key attributes that would define a ‘Product Mindset’ may be summed up as listed below.
- Highest level of Innovation and Creativity
- Vertical expertise in specific product areas and technology
- Continuous thrive to identify and incorporate key product differentiators Forward looking
- Technology oriented
- Product centric
- Customer focused
- Quality conscious
- Technology and Market leadership
An important hallmark, which may be viewed as a manifestation of how strong the existing ‘Product Mindset’ in an organization is, of a strong product company would be a strong presence in there of a vibrant, highly focused and market aware product management team. An organization that can boast of having a brilliant engineering team which is perfectly tuned to the product vision and roadmap defined by their equally smart product management counterparts, more often than not, will have a better chance of achieving the glory of being a market leader in their chosen space.