Introduction

More than a dozen years ago, a chance encounter changed the course of my professional life. ServiceBench, a company renowned for innovation, asked me to come in to diagnose and help solve an unanticipated problem: their technology had grown stale and was no longer flexible enough to meet customer demand. In their efforts to bounce back, the company had tried to modernize its technology platform and had burned through millions of dollars working on a next-generation software product, only to fail spectacularly. The company had never been in this position before. No one knew what to do.

I went in confident I would know what to do. Relying on my experience in the tech world, I was certain the core problem had to be driven by one of the usual culprits: the people, the process, or the technology. I had no doubt I’d find one of these—or some combination of them—to be the source of the trouble.

I was completely wrong.

The people I was working with were razor sharp. The processes they were using, though not perfect, were more than adequate. And the technology they had selected was almost exactly what I would have recommended.

So what had gone wrong? Why was such an innovative company suddenly struggling to keep up with customer demands?

As I worked to restore ServiceBench to its full strength over the next year, I discovered answers to those questions. In the process, I also discovered my calling, gained insight and inspiration, and began to build a business I had never dreamed of building. My life was changed forever, but more importantly, my way of looking at the world was transformed. I had developed a new mindset—a mindset I believe is necessary for all organizations to thrive.

I call it the Product Mindset.

A Common Story

It turns out that ServiceBench’s story was far from unique. Countless companies have spent precious resources attempting to build a new product or refresh an existing one, only to underperform or fail completely. McKinsey research shows that though some companies are seeing financial returns on that investment—25 percent, 50 percent, or more—most struggle just to break even.1

Why is this happening?

It’s happening because companies navigate product development by focusing on how they do the work, rather than how they think about the work. Success in today’s world means doing just the opposite.

There’s no question that the digital revolution is disrupting industries across the board. Companies understand this. A recent McKinsey survey revealed that “only 8 percent of companies…said their current business model would remain economically viable if their industry keeps digitizing at its current course and speed.”2 Unfortunately, many companies don’t understand that if they continue to blindly execute against a list of tasks, they cannot possibly navigate disruption of this magnitude.

The way companies approached product development ten years ago will not work today, but many of them feel paralyzed, unsure of how to change. Despite the growing pressure to adapt, they may kick the can down the road for years. Or they try some changes, without success, and then shy away from trying anything else. They revert to the old path and get stuck there. It’s no wonder almost 75 percent of S&P 500 companies have turned over or will turn over in the next five years.3 Over the next ten years, we expect about half of the companies in the S&P 500 to be replaced.

Even software companies need to think about product development differently. As tech companies, they can easily assume they already have the right mindset, but often that’s not true. Many software companies make the mistake of developing technology for its own sake, without truly understanding the product’s purpose or value.

I know, because my company comes in to clean up the messes left behind when these efforts fail. Companies are overwhelmed and struggling, not because they lack talent or vision, but because they are evaluating their success based on obsolete metrics. They aren’t slacking—on the contrary, most have tried many tools, processes, and governance structures, but none of these solutions set them on the right course.

That’s why I launched my company, 3Pillar. Over and over, we find that companies suffer misconceptions about successful product development. When executives and practitioners hear our message, their eyes go wide as they recognize the true source of their challenges—their mindset. Then it all begins to click into place for them—they need a new mindset. They need the Product Mindset.

Building the Product Mindset

Over the past ten years, 3Pillar has continually asked the question: What are the keys to success when building a digital product? What are the fundamental differences between software built in the old IT world and products that are driving growth in the digital economy?

One key is context. The Product Mindset cannot develop if teams don’t understand the big picture, but lack of context is a common problem—it’s not unusual for each member of a team to have a very narrow view of the product in development. They rarely understand exactly what it is they are building, let alone why they are building it.

Understanding context requires that teams understand this “why”—that they have a clear ultimate objective in mind—but that’s only half the battle. The other key comes from understanding the market and the customer. Only when product teams understand where business outcome and customer outcome meet can a company build a profitable product, not merely an IT asset.

Elements of a Product Mindset

Characteristics

We have found that there are three key characteristics common to successful digital products (which are different from other types of software).

These digital products:

• must be self-funding;
• must be chosen; and
• are never done.

Principles

We have found that the Product Mindset is governed by three overarching principles.

Successful companies:

• minimize time to value;
• solve for need; and
• excel at change.

Together, these three characteristics and principles make up the Product Mindset.

Here’s an overview of how they interact, with much more to come in the following chapters:

• First, for a product to be self-funding, a company must minimize time to value. Remember, the product is responsible for creating dollars, not saving pennies. A product must create revenue in and of itself, not just support an existing value proposition.
• Second, if consumers are going to choose your product above all others, your company must solve for need. You must deliver real value to customers so that they continually choose to pay for what you’re building.
• Finally, once a company recognizes that a product is never done, they will realize they must excel at change in order to leverage this reality of the digital economy.

Who This Book Is For

We started out teaching the keys to developing a Product Mindset to our employees. When we had trained nearly 1,000 of our employees around the world, our clients started noticing. They knew there was something different about what our employees were doing, but they couldn’t put their finger on it. Soon enough, they started to ask us, “Can you train us too?”

When we began to offer workshops to teach this mindset, we noticed two reactions every time. First, excitement. Product development practitioners were thrilled. The concepts we shared resonated and they felt we were speaking their language. Second, anxiety. These managers and directors wondered how this new idea would be received back at their companies. To get everyone on the same page, they asked us to also present to their CEOs, CTOs, and other decision-makers. Hearing this request over and over again only reinforced what we already knew to be true: executives needed to commit to this mindset too, or else it would be ineffective.

That’s why we wrote this book—to inform business leaders who are charged with helping their organizations compete amid constant digital disruption. We hope it also serves as a reference for all product development practitioners.

The insights shared in these pages are the culmination of over ten years of laser focus on helping companies build successful digital products by instilling the Product Mindset. We have worked with companies of all sizes and across a spectrum of industries—from software companies such as ServiceBench, Eloqua, and SourceFire to large media brands such as PBS, NPR, and Univision, to publicly traded information companies such as LexisNexis.

Every company we work with asks the same question: “How do I compete in this new world order?”

They worry that they don’t know enough about technology to lead their...