Ensuring Project-to-Product Success & Value Realization with New Value Delivery Disciplines
- febrero 16, 2023
Innovation is a critical business outcome to the success of any company in today’s digital world. The ability to bring new products and services to market quickly and efficiently while not disrupting your core business can mean the difference between success and failure. However, innovation can be difficult to scale or fund, or both. Companies struggle with creating value that allows for faster and easier innovation. The traditional project-based delivery approaches can no longer deliver large-scale innovation effectively. As Eric Ries, author of ‘The Lean Startup,’ has said, “If we’re building something that nobody wants, it doesn’t matter if we’re doing it on time and budget.
To succeed in the era of big data, AI, and cloud computing, value-delivery operating models that support an organization’s move to business agility must be developed. Decisions based on org-chart structures tend to optimize for only part of the organization, ignoring upstream and downstream effects, dependencies, and constraints. Local optimizations can give value to the teams directly involved but often don’t improve the overall flow of delivery of value to customers. For example, having teams adopt cloud or modern application development techniques can reduce the time to provision new infrastructure from weeks or months to minutes or hours. But if every change requires deployment (to production) approval from a board that meets once a week, then delivery speed will remain weekly at best.
When moving from project to product, a product-centric delivery approach must also incorporate a different leadership style and culture into the organizations that now use lean and agile disciplines and practices. These practices include Lean Startup, Design Thinking, Lean U, Value Stream Management, and a Lean Governance model that supports moving away from projects to products. This blog post explores how new initiatives can succeed or fail as an organization undergoes its journey to a new product-focused value delivery method.
Understanding your investments horizons
As organizations transition to Lean and Agile practices, they must understand their “core” business models and the products that impact their current customers. They also need to understand the “adjacent” products and business models that could lead to new customers or clients. Many organizations fail because they don’t understand or cannot see where they are investing their money and the intersection between the “transformative” or “innovative” products and business models that are underfunded and could leave an organization open to disruption in the VUCA digital world. Thanks to the evolving way that NTT DATA’s Business Agility Enablement practice works, our customers have come to expect this approach with the products, brands, applications, and services we deliver.
Why more companies lean toward a product-centric approach and value-stream management
More companies are leaning toward a product-centric approach supported by disciplines such as Value Stream Management for several reasons. The benefits of this approach include increased customer satisfaction, improved quality control, and faster end-to-end delivery cycles when your teams have unlocked the flow from the constraints and bottlenecks. When measuring what matters, companies should align to improved business outcomes such as accelerated speed to market, minimizing the cost of delay, and greater visibility of the value delivery used in the organization. Other benefits of Value Stream Management are being able to visualize and understand the whole product grouping and the value streams that support it. A product-centric approach to value delivery allows better integration with other parts of the company, such as marketing, sales, and other business units. It moves the organization toward an authentic business agility culture. When moving the organization toward a culture that supports a product-customer-centric approach, companies also ensure that the products being developed align with their most strategic goals and customer needs. Once the organization understands these goals and the vision, it can then embark on its journey toward business agility by focusing on the following:
- Developing products that meet customer needs and wants
- Aligning to the strategic goals of the organization to meet customer needs
- Aligning the organization, including its people, with the value streams that support customers
- Unlocking flow and value within product-aligned value streams
Shift to product-line funding and transparent reporting
Organizations must be supported by a strong business agility governance model that ties in the disciplines of Lean Portfolio Management aligned to the organizational OKRs to be successful with a value-stream-centered, product-centric value delivery approach. These practices must ensure the development and delivery of the right products with high quality and high business value that will meet all your customers’ requirements and regulatory and compliance needs.
Strengthen the alignment of annual budget cycles and product life cycles
With the legacy project models, organizations assign specific teams for specific tasks, which are later dismantled and reassigned to different projects as soon as the project finishes or if they run out of funding. This tactic makes the funding model highly inflexible and treats teams as mere switchable resources.
With the product model, a company can better align resources by ensuring its annual budget activities and product life cycle management are well-aligned and encourage adaptive funding. Six ways to strengthen this alignment are to:
- Work with leadership to transform the essential elements of the organization into measurable objectives or OKRs
- Have leadership champion and understand the change they need to create opportunities for the teams to work this way
- Define budgets to make better near- and long-term investment decisions
- Allocate funding between different product value streams and organize teams around products
- Map how solutions will enhance and drive the upcoming business outcomes through roadmaps for product managers and owners
- Assess work and risks through data-driven decision-making and portfolio reviews
Organizations transitioning from a traditional project-based operating model often measure their success based on their ability to stick to the assigned budget and maintain on-time deliveries. Product-centric models focus on deriving value, incrementally delivering value through the product, and achieving the set business outcomes.
Value must play a significant role in building products. Leaders must define value and measure success by evaluating the impact of business outcomes, such as customer satisfaction, lowered costs, increased ROI, better employee productivity, and more.
Build flexible production budgets
The core of value stream management is ensuring a consistent flow of value with continuous business outcomes achieved. And this consistency, unfortunately, does not work with fixed funding. Product-based budgets need the flexibility to thrive. Budgets must be adjusted periodically and allocated to value streams based on insights derived from business or customer outcomes achieved and the teams’ customer understanding.
Further, when a company has multiple value streams, if one value stream outperforms another, they know where to allocate more budget and where it can eliminate waste. The figure below shows how Epics from a leading healthcare technology company, applies fixed funds to provide dedicated resources to their projects but varies other funding over time.
Source: 2021 Gartner, Optimizing the Move From Project to Product Funding*
As NTT DATA helps move organizations to a product-based funding model, we encounter several challenges. We partner with our clients by helping them:
- Adjust leadership and organizational alignment
- Provide change management, communications, and training on the new way of working
- Move from time-based, project-centric billing to a product or outcome-based delivery model
- Update the relevant skills in product management, channels, marketing, and finance
hese changes can be complex because of the shift in mindset and approach. As such, even with the best tools, you need to understand some best practices so that your outcomes match your expectations.
The bottom line
Optimizing funding for frictionless value delivery is critical for your organization’s future. IT leaders looking to maximize their product benefits and scale product management across the company must work with finance for better budgeting and optimized financial governance practices.
Move away from siloed metrics and welcome flow metrics to measure your outcomes. Reorganize your teams to support the product-based operating model focused on delivering business or customer value.
GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.