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January 25, 2022
July 17, 2019

6 Fuckups on the Journey from Outsourcing to a Product Company

There are plenty of reasons why you would want to turn your nearshore/offshore software development company into a product company. We already discussed the reasons here, so click if you are unfamiliar with the topic. In this blog post, we will go through the typical mistakes that every (seriously, every) company makes during the transition period.

1. Your B Team is developing the future flagship product.

Plenty of reasons to do it and all seem rational. Your A-Team is working tirelessly on serving existing clients to maintain the cash flow. The current revenue stream is the most important and no matter how much your existing client base is 

  • letting you down, 
  • pushing down ordering prices, 
  • demanding more and more for the same price. 

You keep treating them as you always had. Clients even insist on involving particular experts from you. As the CEO (or owner), you fear that anything less than the A-Team will cost you your current clients. While losing your clients will result in no excess money that can be spent on new product development.

2. Customers are not part of the project

Development projects are pretty similarly organized in terms of scope setting: either you get a detailed enough specification OR you bill for the staff’s time and material (T&M). In a T&M project, your people are part of a large team as “almost employees”, located either onsite or offsite. In any of those cases, it is natural that developers never had to worry about end-users or give too much thought to what’s important to the user. We do not speak about UX/UI - we talk about the underlying benefits customers would pay for. These things were defined and decided by the clients’ stakeholders: such as a project manager, a product owner, or a project committee. The bad news is, that when you are trying to create a product for external users (i.e., people not associated to projects), you need to move out of the ivory tower in order to get users and buyers involved right from the start.

You involve customers to get a better understanding of the business problem and the perceived value of any solution. The goal is to implement sales focus from day 1: as early as the project kicks off and not to develop anything that will not sell later. The best feedback on whether a product will sell or not will come from customers.

3. It’s just another development project.

What made you excel in development projects is toxic for any market-based product. The fancy coding, the best technical solution, fixing small details, and polishing code to perfection, is just going to make the adventure expensive. This happens usually, combined with the “Customers are not part of the project” and “Lack of UX design and research” faults. Without UX or customer feedback, developers tend to figure out what they think they should work on. They also take the freedom to define quality levels for each part of the code.

Moreover, code definitely comes far before usability. Not because developers are idiots, but because that’s what makes them happy, and that’s what they find challenging, and frankly, they have never been with a product company, so how would they know they should do it differently from now on?

4. No project plan

Every nightmare has to stop eventually. These product development projects never end. And the nightmare never stops. You stop counting the hours and the money spent on the future product.

This is typical for companies working on T&M base. You find some spare hours here and there, and your people fix this and that on your future product. The code is messy - because mainly your B-Team is in charge, and since all you have is a developer based specification, the usual troubles arising during developments are solved inconsistently. Since you don’t have a product owner and no connection to users, decisions, and priorities are not aligned with customer demands. Without a definitive project plan, you have no idea when to cut losses.

5. Lack of UX Design and research

Today, the most significant differentiating factor in the digital industry is the experience. The feel, usability, and focus customers perceive. This is what a great UX professional can add to the process. As this is a cost that cannot be accounted for on other development projects, it is truly a tough decision at the first project to hire a UX pro or to involve a UX company.

The lack of UX is also a key sign of a developer-centric (engineering) culture without user and business focus. This is probably the most important emerging trend besides agility, and it will change the way you think about business analysts and business processes. User experience and customer experience are key areas the largest companies put a focus on, and any development company with an understanding of UX has a competitive advantage. If you have in-house UX, you are probably better than 80% of all developer companies.

6. No organizational change to support the new (product) strategy

A new strategy needs organizational change. What you are undertaking is probably the biggest and most challenging turn in your professional career. You will need new thoughts, new people, and a modern structure. Sales and marketing drive successful product development (interacting with users & customers). You will need to add skills that were never really important or necessary before, like pricing, research, event management, sales, product owner, UX, UX driven development, leaner processes, etc.

Hoping for a new structure of business just does not work without some transformation of your company and top manager level commitments.

If you are experiencing one or more of these troubles, don’t be ashamed. The good news is that there is a way out of this, and it’s not even expensive if you leverage best practices from lean startups. You can still have your best team members working for your current client base. By involving experts and other pools of necessary skills, you can slowly start turning the mothership into a new direction. Take into consideration that what you are undertaking is no less than a structural culture change, where the inputs of PMs and IT managers are replaced by input from users and business decision-makers. It’s not about the best code anymore, but the best experience. Good luck and perseverance for your journey! You are onto something.