One Big Thing: What the Shift from Projects to Products is Really All About

At the end of my last post, One Big Thing: The Biggest Hurdle for Project Managers to Become Product Managers, I touched on the different characteristics of projects and products, including the different ways these types of investments are managed. In this post, I’ll focus on the investment implications. The topic is an important one: The change in the way organizations invest is actually the single most profound impact of the business’ transformation from projects to products.

Historically, organizations invested in technology through projects. Often, these were large “capital” projects that involved acquiring and installing hard assets, such as mainframes, servers, networks, and so on. These projects also usually required a large up-front expenditure that would be depreciated over the investment’s useful life and provide a much smaller operational annuity once things were put in place. This operating annuity would often start once the project was over and the responsibility for operations was given to the business, or possibly to a central IT function. Either way, the spending pattern was the same: A bunch of money went out the door in exchange for a bunch of stuff and the people, usually contractors, to put it in; then a much smaller amount of money would be needed to keep it going once it’s in.

Nowadays, however, technology investments in most organizations are dominated by software not hardware—and the spending pattern for software is usually very different, especially if we’re talking about mobile apps or other more modern internet-based applications. Software today usually starts out small, maybe as a skunkworks project in the back room of the company or with a couple of people cranking out code during a hackathon. Once people believe it delivers value, the software grows over time. As a result, the costs of software typically start out smaller and grow over time as well. Typically, the more successful the software, the more people that will be needed to keep it going.

So the shift from projects to products is really about changing the primary vehicle for technology investment within the organization. Sure, there will still be times when you need a good old-fashioned project, a temporary cost center to accomplish a specific goal by a specific date. However, more often than not these days, you’re actually investing in an app that you want to deliver value for as long as possible. There is no end date. Another way to phrase it: The projects-to-products shift is about operationalizing technology—taking what was once a project-based model and making it a constant presence in our everyday business operations.

We already see this happening in many organizations, whether people realize it or not. One recent study found almost three-quarters of technology spending is at least partially funded by groups outside of IT.   This change in spending patterns is basically the natural end result of the reality that “there’s no such thing as a significant business initiative that doesn’t involve technology.” Our organizations need to be prepared to address this shift head-on and take advantage of the positive potential it provides. I’ll address the opportunities that await organizations that emphasize a product management approach in my next post.