spurkis (spurkis) wrote,

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Innovation, Commoditization and Management in IT

Simon Wardley recently gave a talk at the Butler Group on innovation & commoditization of IT.

I've talked to Simon a number of times on the subject, and indeed, he's talked at a number of conferences on it. What I find particularly interesting about this one is his foray into the management of organizations. I quite like his S-curve visualization of the type of activities an organization goes through as they progress from the innovative and transition to the ubiquitous. He makes the key point that:

    "[An organization] need[s] to use different methodologies for different stages of an activity's lifecycle."

Interestingly, I've seen this a number of times in IT startups I've worked for - as they become successful and grow, they always change irrevocably. This is simply because the nature of their activities change. From my experience, here's a quick overview of a typical startup building a SaaS product going through Simon's 3 stages:

  • Innovation: They typically start off with the bare minimum needed to build an innovative v1.0. Half of the time, the founders are helping to build the product, if not then you can bet they're working directly with those who are. Management structure is pretty flat, and development methodology is typically Agile (or non-existent).
  • Transition: As the product grows & becomes more successful, the company hires more employees. Different teams are created, and inevitably middle management is introduced, along with some sort of formal management methodology. The new management structure can take many attempts to become establish, eating up several months to several years. In some cases Waterfall may replace Agile. During this time some of the older employees will become fed-up with the new bureaucracy and leave.
  • Commodity: The product line is well established, highly used, and doesn't change much. Overall management structure is well-established and doesn't change much. In general, the cost of change is high, and the business' goals are focused on getting the most out of their existing products. Management will likely have introduced PRINCE2 to start running larger projects for their clients.

I believe the Transition phase is the most challenging for a startup - it can make or break a company. For example: one growing SMB I worked for was in its transition phase and had recently adopted an overall organizational management structure that was good for its existing activities, but unfortunately stifled innovation and seriously threatened the company's future. It was only through an external source of innovation that the company succeeded.

Needless to say, at large companies this lesson is potentially gold dust. Indeed, some have already learned - as Marissa Mayer, Google's VP of Search & UX, noted in an interview with Fortune Magazine in 2006:

    "Most of the teams at Google are three to ten people. ... They operate like small companies inside the large company. Google is a lot like managing a VC firm, because you're placing bets on different teams. Our organization mirrors the Internet. It looks more like a network than a hierarchy."

Certainly a valuable lesson for all those employed in IT & involved in change. Which is pretty much all of us.
Tags: commoditization, innovation, management

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