When it comes to software delivery, the topic of outcomes often comes up.
Are we creating value rather than just features? Are we achieving specific business results that make these massive technology investments worth it? These questions are worth asking – because, alarmingly, the answer is often no.
For every dollar a typical company invests in software development, only about 25 cents supports the company’s highest-priority business outcomes.
This stark disparity between investment and results is why tech leaders are rethinking their project-based approach to software delivery and adopting a product operating model.
A product operating model delivers significant bottom-line benefits along with speed and flexibility. The evidence is compelling: According to McKinsey, companies with high product operating model maturity have 60% greater total returns to shareholders than bottom-half companies and 16% higher operating margins.
In this post, we’ll break down an engaging conversation. When Planview CEO Razat Gaurav and GVP, Product Management Alan Manuel sat down to talk about product operating models, their discussion revealed:
- what’s driving the urgent project-to-product shift,
- software capabilities that enhance visibility for leaders while boosting developer satisfaction,
- three critical elements of an outcome-driven organization, and more.
Listen to the full video – it’s less than 10 minutes long – or navigate directly to the sections most relevant to you using the timestamps below.
A Guide to Product Operating Models: What Every Executive Needs to Know
Alan and Razat Talk Software Delivery Methodology (0:00-0:23)
Alan and Razat discuss how the product operating model can help tech leaders at any organization increase the velocity and improve the quality of their software development competency.
The Challenges Faced by Tech Leaders (0:23-1:22)
A few common themes have emerged in recent conversations with tech leaders. Organizations are looking to increase productivity, efficiency, velocity, and quality in their digitalization efforts while justifying the rapidly expanding level of investment in technology.
Many companies are working toward those outcomes by implementing a product operating model, which we define as a strategic framework that organizes a company’s teams, processes, and systems around delivering a specific product, prioritizing customer value and continuous improvement, with the product itself at the center of operations.
The Software Development Landscape (1:22-1:50)
Alan discusses data that reveals more than 50% of software developers in the US are employed in the professional and business services sector (as opposed to the information sector at 15.7%).
This means that even non-software companies, from banking and insurance to retail and automotive, are working on developing a core competency in software development. The concept of the product operating model encapsulates some of the changes an organization must make to be efficient in software planning and execution.
The Unseen Costs of the Project-Based Model (1:51-2:17)
Planview’s analysis of more than 3,500 customer value streams (akin to product lines) revealed that inefficiency in software development is more common than not.
We found that for every dollar a typical company spends developing software, only 25 cents go toward the highest-priority business outcomes. The rest of the investment was wasted on misalignment, teams working on the wrong thing, and other inefficiencies.
The Critical Role of Product Manager (2:18-2:45)
The product manager is crucial to avoiding this problem. The product manager is the gatekeeper for all the work that the engineering teams do, becoming a central focus point between engineering capability and business results.
With Planview, product managers can review task age and capacity constraints to help them understand where to prioritize and deprioritize.
The Visibility That Tech Leaders Need to Enable (2:45-6:02)
Another way tech leaders can optimize work for their teams is through value stream management. In Planview, flow velocity shows the actual productive capacity of an organization over time. It helps product managers avoid the classic software problem of planning beyond their team’s capacity.
However, optimizing individual developer productivity is just the start. This oversight should extend across the entire team. Technology leaders need to enable skills like this for their entire organization at scale.
However, to do this, they need the data to show where these mismatches are occurring. In Planview, bottleneck finder allows leaders to identify where there’s a mismatch when a task is handed off from one developer to another.
Moving to the product operating model lays a foundation for best practices like these, which help organizations optimize their technology investments and improve the developer experience.
The First Element: Strategizing and Prioritizing (6:02-7:17)
As tech leaders consider resources, they continually refer to company strategy and consider investments and goals. This strategic planning process is essential for prioritizing software development work. But how do they ensure alignment between the strategy and the work? If the strategy office and the technology team aren’t in communication, then that strategy will never become a reality.
The Second Element: Setting OKRs (7:17-7:50)
Alignment comes from OKRs (Objectives and Key Results). OKRs are to the strategy office what the nervous system is to the body. They take the strategy and share it all over the organization, breaking it into micro-business results and giving each team the information it needs to prioritize its work on a daily basis.
The Third Element: Planning as Teams (7:50-9:14)
Strategy and priorities come from leaders, but effective plans include the teams in their day-to-day work. With Planview, each team can see the individual outcomes they’re working toward. They exercise their planning capabilities to keep items aligned to their OKRs.
Journeying from Project-Based to Product Operating Model
Tech leaders are part of an exciting phase in software delivery. There’s an opportunity to reimagine the way work is strategized, planned, and executed so it will ultimately drive bigger outcomes.
Are you curious about where your organization falls in the project-to-product shift? Take a brief assessment to reveal your stage in the journey and unlock resources to help you move into the next phase.
