How inefficiency is hurting product organizations

Before we get started, it is essential that we clear the age old debate on efficiency and productivity. Business leaders often think of "efficiency" and "productivity" as synonyms, two sides of the same coin. When it comes to strategy, however, efficiency and productivity are very different. At a time when so many companies are starved for growth, senior leaders must bring a productivity mindset to their business and remove organizational obstacles to workforce productivity.


Efficiency is about doing the same with less. Companies most often improve labor efficiency by finding ways to reduce the number of labor hours required to produce the same level of output. Productivity, on the other hand, is about doing more with the same. Growth in labor productivity is measured by the change in output per labor hour over a defined period of time. For an organization, it is directly tied to performance. For most of the last three decades, senior executives have been encouraged to take an efficiency mindset to their business. In effect, identifying labor hours (or materials) that are unnecessary in order to produce the same level of output. In the absence of growth, efficiency gains are most often monetized through workforce reductions. Starting with the quarter ending March 31, 2015, however, S&P 500 earnings began falling, and earnings growth has remained negative ever since. Without top-line growth, continuing to wring out greater profits through efficiency has become the managerial equivalent of attempting to squeeze blood from a stone.


If efficiency is no longer the secret to superior performance, what about productivity?

With that debate aside, let's take a look at how Product and Marketing teams are impacted by this impulsive thinking focused on "efficiency"


Product management and marketing functions have often become isolated disciplines, focused on delivering yearly roadmap of milestones and events. Let's take a look at these detractors in detail


Build


Product teams often focus on ’Build and Deliver’ attitudes to align closely to a year-long roadmap, that was developed 6 - 12 months ago. Having a plan and an aligned direction for your team is useful however the problem is that with rigid, fully committed plans to your stakeholders and customers, there is little room left for adaptability and capitalizing on new, better, and more valuable emergent opportunities.

Product teams must instead focus on establishing feedback cycles during product development, where you can Build – Measure – Learn. Each work item you undertake must have a benefit hypothesis, whether it is an epic, a feature or a user story. At the end of each cycle, allocate time to 'Measure' and 'Learn' – look at your Active Usage, Flow metrics, Throughput, Flow Time / Cycle Time, Work in Progress, Predictability and other Product Metrics – Leading indicators to determine, have you moved closer to your Product Goals and delivered business value.


Yearly Budgeting


To be adaptable, your core product use cases must be designed in adaptability as well. Why do we have yearly budgeting? Traditional budgeting is in most companies is still project based and projects need to be fully scoped out into lengthy Market Requirements Document and Product Requirements Documents with fictitious and non-attainable metrics. Unfortunately, the world of software is inherently complex and most of these estimates never deliver the value it was intended to. Any business metrics developed without understanding how customers are using your product, are a complete waste of time. What we need is a more agile, adaptable budgeting which forecasts intended outcomes but releases funds only on indicators of progress.


Business Systems


Companies today are burdened by siloed, difficult-to-use business systems that complicate processes and hamper operations. According to market research firm IDC, companies lose 20 to 30 percent in revenue every year due to inefficiencies. And yet, many companies continue to “make do” with their current applications and systems even though those may not be the right solutions. Unfortunately, companies will often repurpose one of these systems for a task which has a plausible functionality for the project


  • Silos

Regardless of what industry you are in, or the type of customers you serve, the challenge of managing process flow and operations across diverse platforms and systems is universal. Combining tedious manual tasks with the reliance that company departments have on a smooth daily workflow makes it virtually impossible to maintain any kind of competitive advantage. There have been studies done on the effect siloing has on productivity within certain industries. And the general conclusion has been that silos eat up a huge amount of resources, particularly in terms of interdepartmental cohesiveness.


  • Poor Systems Integration

The growth of automation has led to more systems and solutions being in place than ever before, each requiring a set of processes to enable its successful use. According to an IDC survey, The Document Disconnect, over 80 percent of business leaders surveyed from sales, HR, procurement and other departments agreed that problems “arise because they have different internal systems/applications that don’t ‘talk’ to each other," while 43 percent of workers surveyed said they often have to copy/paste or rekey in information.


  • Bottlenecks

Just because a process has been executed one way for a long time doesn’t necessarily make it the best option. Often, companies will overlook sources of process slowdowns because of their lack of visibility and inability to understand the impact of a bottleneck. These bottlenecks are sometimes the result of not adapting to new technologies -- or “gatekeepers” demanding control over a specific phase of a process.


  • Lack of Insights

Even when companies have the right business intelligence information available, it may be inaccessible or erroneously reported due to a lack of real-time data. Leaders who don’t have the most relevant insights at their fingertips are less likely to make smart choices.


  • Loss of operational performance

Without a complete understanding of all components of their business, executives lose the ability to identify critical weaknesses and plan for predictable growth. Simply put, they cannot remain reactive to operational vulnerabilities or mitigate the complexities of running a business in a global economy. Ultimately, a lack of process visibility leads to the assumption of greater risk, a loss of stakeholder trust and less positive growth.


Summary


Product and Marketing organizations are core to product success. Cloud and SaaS is redefining how software needs to be made. To cut down bottlenecks and promote common basis of understanding, It is essential that product teams rely on product intelligence platforms that centralize product performance data which can act as a source of truth for Product Management, Engineering and Cloud Operations teams. Siloed offerings focused on solving part of the problem will only lead to control issues and add to inefficiencies.

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