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This chapter is from the book

Project Ecosystems

Good managers fail because they don’t understand the business ecosystem in which their projects must live.

Software projects, whether within a package software company or an internal IT organization, operate within the ecosystem of the company or larger organization of which they are a part. An entire organization, in turn, operates within wider markets made up of competing organizations, which in their own right are also a kind of ecosystem. The product mission profile (defined in Chapter 3) focuses on the key product characteristics. To dominate a market in today’s world, a product has to be the best at something specific, not just good at a variety of somethings. In turn, a product’s profile—its scope, schedule, resources, and defects—dictates development strategies. But in order to understand the reasons for a particular product profile, one must have a clear understanding of the organization’s focus in the marketplace, that is, of how the firm fits within its competitive environment or ecosystem. In ecosystems, every action of one species is met with a reaction from another. Similarly, project teams and companies rarely control their own destinies; they operate within constantly evolving ecosystems. This wider perspective is often lost in the whirlwind of learning new technology and in the hectic pace of development, but it is crucial to the success of a product-development team.

My purpose in this section is not to investigate the fields of marketing and business strategy in depth, but to illustrate how these two aspects of an organization’s ecosystem impact its software development strategies. The following explores turbulent markets by examining two current strategic analysis methods: value disciplines and tornado marketing. The description of each of these methods is followed by an analysis of their implications for software development teams.

Value Disciplines

Michael Treacy and Fred Wiersema make the case in Discipline of Market Leaders (Treacy95) that a company must “pick a dimension of value on which to stake its market reputation.” They define three value disciplines: operational excellence, which provides the lowest total-cost-of-product ownership; product leadership, which produces the best product; and customer intimacy, which provides the best total solution to the customer’s problem.

Treacy and Wiersema’s premise is that no company can excel in all dimensions; in fact, customers won’t let it. Customers understand a company’s value proposal inherently: For example, they go to Wal-Mart for best price and Nordstrom’s for best total solution (defined in this case as great service). Customers understand that they will not get both best price and best service under one roof. They expect to pay more for service. They know where to go for each value proposal they seek. They know what they want, and they want more of it—whether it’s low price or product excellence. Companies with mixed messages don’t lead markets.

Having a value focus doesn’t mean ignoring the other dimensions—they too must be satisfactory. If Nordstrom’s prices were to get too far out of line, their claim to best-total-solution would lose some validity. Likewise, if Wal-Mart’s service were atrocious, customers wouldn’t find their low prices so appealing.

Treacy and Wiersema’s concept of picking a value discipline necessitates committing the entire company to an operating mode to support it. For example, operationally excellent firms are characterized by discipline, Command-Control management styles, conformance to rules with little variety, and highly integrated, low-cost transaction systems—they streamline operations, reduce variety, and relentlessly drive down costs.

Customer-intimate companies are highly client- and field-driven, and are flexible and responsive. They concentrate skilled staff in the field in order to intimately understand their customers’ businesses, and to provide tailored customer information systems. Their emphasis is on creating deep, long-term customer relationships.

Product-leadership companies aggressively experiment, attack competitors’ products, encourage risk, problem-solve voraciously, discourage bureaucracy, and foster information systems that actively encourage the cooperation and knowledge-sharing developers need for product innovation.

An IT software project team, supporting a product manager in a product-leadership company, using a by-the-book SEI-defined process strategy, is mixing water and oil. Any talk of integration, low maintenance, defect-free code, and architectural elegance will fall on deaf ears. Just as the product manager’s customers are looking for innovative, leading-edge products, the product manager is looking for innovative, fast response from his or her information-support services.

In contrast, using an Adaptive Software Development strategy to support a transportation and distribution manager in an operationally excellent company probably will not work either. In a culture that doesn’t like mistakes, stresses conformance to rules, appreciates low-cost alternatives, and thrives on integration, little real support for practices (and underlying mental models) that deliver software at high speed exists.

There are two important observations to be drawn from this idea of focusing on a single dimension of value. First, one must understand the business environment and align software development strategy with business strategy. Making the business value visible to the software development team is an important step in the alignment process. Second, if focusing on a single value dimension is necessary for a company to be a market leader, it is logical to assume that a software product or project similarly should have a single focal point. A product needs to be good at a lot of things, but it needs to excel in a single dimension. This idea about the difference between “good enough” and “excellent” was discussed in detail in Chapter 3 and incorporated into the product mission profile.

Tornado Marketing

While Treacy and Wiersema examine general business strategy, others target high-tech product marketing strategy. Since most high-tech companies exist in increasing- rather than decreasing-returns environments, development team members and managers can better focus product development if they understand more about marketing strategies.

In fact, one of the more enlightening periods of my own professional journey was three years spent as a product marketing manager and vice president of Sales and Marketing for a high-tech firm. The experience changed my attitude significantly—so much so that, in seminars, my admonition to developers is to spend time with sales and marketing staffs if they really want to understand their companies, products, and ecosystems.

In adaptive development environments, a sense of shared vision is essential to the collaborative effort needed to produce outstanding results. Part of this shared vision is understanding the overall marketing strategy for the product, where the product lies in its life cycle, and how development strategies need to reflect the product’s life cycle stage. Geoffrey Moore’s work in the area of high-tech marketing might be called “Technology Adoption Life Cycle With A Twist.” His primary message is that

  • The winning strategy does not just change as we move from stage to stage, it actually reverses the prior strategy.
  • —G. Moore [1995], p. 10.

Moore’s work is especially interesting for the following insights:

  • If product marketing strategies can change dramatically from one stage of the Technology Adoption Life Cycle to another, development strategies probably need to change also.
  • Whether developing software for a software vendor or an internal IT group, one needs to understand what characteristics distinguish customers at each phase of the life cycle in order to successfully develop more appropriate products and thereby create greater customer intimacy.
  • The Technology Adoption Life Cycle is a change model. It provides insight into topics such as learning and technology transfer.

The Technology Adoption Life Cycle

The Technology Adoption Life Cycle is a model of how people react to discontinuous innovation. It graphs as a bell-shaped curve that measures risk aversion, beginning with early innovators who are the first to embrace a new technology, and ending with the conservative laggards who grudgingly adopt a technology only when no alternative seems to be left.

Figure 7.1 depicts the Technology Adoption Life Cycle (shown as a bell curve of numbers of customers) divided into the kinds of customers in each segment.1 The early market contains technology enthusiasts who are committed to and enjoy tinkering with new technology. They have little money, but they are essential to early marketing efforts—“they are the gatekeepers to the rest of the life cycle” (Moore95, p. 15). The enthusiasts are interested in the technology itself, not necessarily in its usefulness to the business.

Figure 7.1

Figure 7.1: Technology Adoption Life Cycle Bell Curve.

The visionaries are early adopters of technology. “These are the true revolutionaries in business and government who want to use the discontinuity of any innovation to make a break with the past and start an entirely new future” (Moore, loc. cit.). They want to exploit new technology and make a mark, and they have money. Visionaries don’t need recommendations from other successful users of the technology; they intend to set the stage. However, they do depend on the enthusiasts to bring new technology to their attention. There are a small number of visionaries in any market segment.

Pragmatists constitute the first high-volume segment of the life cycle. They form a major buying segment. Pragmatists are not looking for a breakthrough, but are more interested in a proven technology. They want to see it in use by other pragmatists, preferably in their own industry. Pragmatists want infrastructure and support in place before they commit their organizations. They want to buy from the market leader to insure reliability and support.

Conservatives enter late into the market. They are leery about the professed benefits of any new technology, and want solid proof of those benefits. They are also price-sensitive.

The last group, skeptics, are people who are so suspicious of anything new that they need to be sold around rather than sold to. Writers who are diehard typewriter users and are adamantly against computers and word processors are an example of people in this group.

The Chasm

While this life cycle model has been around for many years, it has not fully explained high-tech markets. Moore writes that the main reason it has not is the time chasm between the early-market enthusiasts and visionaries and the early-market pragmatists. This chasm, depicted in Fig. 7.2, represents the sometimes lengthy time period it takes to move from the visionary to the pragmatist segment of the market.2 The buyers represented by these two segments are so different that a major shift in marketing strategy is needed to bridge the gap; moreover, within the pragmatist segment, a second marketing strategy change occurs.

Figure 7.2

Figure 7.2: The Chasm.

Visionaries understand that a technology is new. They expect it to work, but they also understand they will have to improvise and probably provide substantial customization on their own. They are usually project-oriented, wanting to change only a relatively narrow area of the business.

Pragmatists want everything in place. They don’t want to customize, and they expect support and services to be provided by either the primary vendor or specialized suppliers of services for the vendor’s products. They want to standardize the technology throughout the organization. They have a great deal of money. To sell to a pragmatist, a vendor must have good references and total problem-solution capability (software, hardware, training, service, and more), neither of which emerge from early market sales. This time chasm between the visionaries and pragmatists swallows many aspiring high-tech companies, particularly when forecasted sales to visionaries fail to materialize.

Moore’s strategy for crossing the chasm and penetrating the pragmatist market is twofold. The initial effort invokes a niche strategy, which he calls “the bowling alley.” Essentially, the strategy involves a company’s carefully picking a market segment and working to provide a total problem solution for that single segment. Examples are Apple (with the Macintosh’s penetration of the in-house graphic-artist market using desktop publishing) and Sun (with its targeting of the open systems market). When one segment is satisfied, the next is targeted (as if it were the next bowling pin in a bowling alley). As each segment is attacked, more of the total solution for which the pragmatists are looking is put into place.

When enough niche “pins” have fallen, the product enters another market phase. This is the point at which markets virtually explode as if a tornado were sweeping across the landscape. Some tornado-type successes have been Cisco Systems (with its explosion into a billion-dollar company in just a few years) or Netscape (with its virtually overnight capture of the Internet browser market). As the company enters the tornado phase of the market, the niche strategy is abandoned. The tornado is powerful and fast, sweeping competitors up in a swirling vortex. Once the pragmatists begin to buy, they move quickly. When the tornado is roaring, it sweeps up whichever product appears on the customer’s doorstep. Oracle, for example, swept past the competition during the tornado phase, and has been a leader in the relational database market ever since.

Implications

I have spent more than a couple of paragraphs explaining Geoffrey Moore’s work for two reasons. First, the volatile, high-tech markets he describes are exactly those that need adaptive development methods. Second, in order to adapt within the boundaries of a development project or a development organization, the members of that project or organization need to understand both the marketplace forces that drive their companies and the fact that those forces change quickly.

The most obvious effect of these volatile markets is the creation of a need for accelerated, adaptive methods to develop the products. A few months can mean the difference between being a market leader and a distant second. Moore discusses how the approach, or sometimes even hint, of a tornado product attracts huge influxes of money because the potential returns are so enormous.

  • These new pools of capital, in turn, create some of the fiercest economic competition on the planet, in part because winning or losing is compressed into such a short span of time.
  • —G. Moore [1995], p. 7.

The differences between the strategies in the bowling alley and in the tornado illustrate how an entire company must respond to drastically changing conditions. In the bowling alley, the niche strategy calls for high-contact, consultative selling. A premium is placed on understanding the customers’ specific business and how they would apply the new technology. Product features are added for specific customers’ needs. Customer intimacy is key to success. Since market segments are selected to avoid direct competition from larger firms, the focus is on the customer rather than on the competition.

Once out of the bowling alley and into the tornado, everything changes. There is only room for one market leader, and ascension to that throne will happen very quickly—especially noticeable in comparison to how slow movement was in the bowling alley. Moore describes the strategy as one in which the leader-to-be ruthlessly attacks the competition, expands quickly using fast sales cycles, focuses on operational effectiveness in order to deliver products, and ignores the customer. Ignores the customer? Once in the tornado, there is no time for customization or hand-holding. The strategy is to sell, deliver, and move on. Competitors who dwell too long on a single customer let four more get away to the competition.

There is an implication here for a product’s mission profile and for its quality issues. Historically, a key selling point for methodology and process-improvement proponents was the reduction of total life-cycle cost by enabling developers to build the software right the first time, thereby reducing ongoing maintenance. However, in high-technology markets, notably during the tornado phase, the potential speed of revenue growth so far outstrips any long-term maintenance cost that the decision about whether to do it perfectly versus to do it good enough is really very simple. Miss the market, and long-term maintenance cost is the least of a company’s worries. High-speed development strategies are critical in these environments.

A climbing analogy illustrates the point: The higher up a mountain one goes, the more quickly and more violently the environment changes. Recognizing when those changes approach and reacting to them quickly is necessary for a climber’s success, and often for survival. Similarly, software development organizations that lock in to a particular set of strategies, or that do not adapt their strategies fast enough, cannot adequately support their companies. Understanding business and marketing strategies helps developers understand why they are asked to focus on one direction one week, and the next week on another. It’s not because of arbitrariness or incompetence on the part of the marketing department, but because such behavior is necessary to survival in a turbulent ecosystem.

Product development requires periods of creativity and innovation, surrounded by intense rounds of practical implementation. It requires that developers have the flexibility to explore ideas hidden in unconventional niches and the doggedness to bring high polish and minimum defects to market. And, it often requires all of these diverse behaviors from the same individuals. It is what makes leading software product development in extreme environments such an exciting occupation.

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