"Economies of Scale is being replaced by Economies of Speed. Fastest learners win."
Software scales with zero cost and delay
Every company is gradually becoming a software company to a certain degree. Compared to physical products, digital services scale (almost) indefinitely without significant cost and can be distributed globally everywhere practically without any delay.
Economies of Speed - Fastest learners win
Due to infinite scalability and instant distribution of digital solutions, those companies that are the fastest to learn the optimal value proposition and business models behind it, win big in business.While ‘economies of scale’ is still relevant, ‘economies of speed’ is starting to replace it as the fundamental success factor.
Product Evolution
The optimal value proposition is tough to identify and changes over time. It simply cannot be formed by a single-shot analysis and plan. Instead we can follow how the nature has been finding the fit since the beginning of Life. The only realistic way of building systematic success is practically through product evolution, series of incremental and systematic trials.
Evolutionary capability can be split to two fundamental elements:
1) cycle speed
2) ability to steer direction (by learning on each cycle)
Cycle speed
Cycle speed is essential for fast learning. Those companies that reach high levels of cycle speed, simply get more feedback and can test more variations in a given time frame compared to competition.
There are many factors that define the cycle speed, some of the fundamental ones are
Autonomy and independence of the teams
Talent density and coverage
Technical debt
Level of self-service and automation
Management style
Flow, often affected by work-in-progress
It’s important to note that beneath the surface there are critical elements in management styles and mindset that affect these factors either directly of indirectly.
Ability to steer direction
Steering direction is the other critical capability. To come up with the optimal value proposition, product teams need to maximise their ability learn on every cycle. Super fast cycle speed alone without steering will take you somewhere for sure, but not necessarily to where you would like to be.
There are many factors that define the ability to steer direction, some of the fundamental ones are
Clear problem domain - teams organised around value
Clear product vision
Solid North Star with related metrics
Validation on all levels from early insight and strategy to production
Customer centricity and direct contact to customers
Feedback loops and quality of data
Build your team for product evolution
The traditional metaphor in business has been the factory. Our less glorious observation is that majority of the product teams are unknowingly in a feature factory mode, at least to a certain degree. They often focus on “efficiency” and output, and justify their existence based on the number of produced features instead of focusing on optimal value.
To benefit from Economies of Speed and succeed in digitally augmented business, which means pretty much any business nowadays, you may want to abandon the factory metaphor and build your organisation to embrace evolutionary approach to focus on value and outcomes.
Paavo Punkari
Co-founder at Fram Partners
Fram Partners is a partnership of
experienced software and product people
who want to take product teams and
their products to the next level.