A product is a solution to a problem that is shared by many.
Products can be of two types: analog and digital.
When looking at digital products specifically, they are also broken down into two types: external and internal, as summed up clearly in the diagram below.
An external digital product is a product that a team builds and makes available for those outside of their company to derive value from. Facebook, TikTok, and even our very own airfocus, the first modular product management platform, are external products.
An example of an internal product was BaseCamp when it was initially created by 37signals. Managing an agency in 1999, Jason Fried and his confounders built Basecamp as an internal project management tool to manage their work with the clients.
1 Gartner, “5 Governance Steps to Accelerate Your Project to Product Transition”, by Remi Gulzar, 13 August 2021
As time progressed they doubled down and decided to modify Basecamp into a true Software as a Service (SaaS) consumer-facing product that can be used by other customers and users; an external digital product.
There are other types of internal products as well. These include IT products, such as the help desk, email servers, cloud services, and data security.
And other types, including business products. Business products help businesses be more efficient, drive further innovation, and gain a competitive edge.
Similar to IT products, they ultimately support business departments to be more efficient and deliver more value.
While these generally have come from IT, we have seen a recent trend coming from business departments. For example, a developer on the marketing team builds a product to help the marketing team be more efficient.
While external product management focuses on customers, with internal product management the focus is on business users.
Here a product manager (a key member of the IT team) works to support their business users by making them more efficient to deliver value.
The general needs and capabilities of a business includes multiple activities such as:
Creating quotes
Processing orders
Managing contracts
Managing customers
Determining pricing
And these key tasks vary from department to department. For example, marketing can include:
Developing market study and strategy
Creating collateral
Media advertising
Product design
Competitive intelligence
However, do note that this list is for market-facing products, where a lot of current product management discussion generally centers around.
Besides supporting solely market-facing products, businesses have departments that have problems to solve and further value that can be generated.
Internal product management helps sales, but also any other business department. For example, assisting the finance team with being more efficient.
IT teams work with business users to define business problems, prioritize them, and craft solutions for their business that will assist business users with driving more value. Not the other way around.
Another benefit of internal product management is that when added to your organization’s value stream it can lead to more impactful solutions for key stakeholders.
A value stream can be all of the steps and actions that one takes to add value to a customer. While generally focused on external customers, with internal product management this is now used internally to assist business users.
For example, building and refining tools that assist the sales team with being more effective.
When internal product management is applied, businesses take and utilize product management principles that have generally been applied to external customers to their internal business users.
The goal is to fully support a shift from output focused results, project management, to outcome focused results that deliver value to your business users..
Internal product management applies product management knowledge, methodologies, and frameworks to support this.
To sell internal product management to your team you need to explain the value that it will provide to your internal business stakeholders, and map the work performed directly to company OKRs.
What really matters are metrics that show that success has been reached; constantly helping your business users reach their goals.
Gone are the days of lack of clarity on what it means to be “10x” better as an organization.
Organizations need to reconsider their overall development process and team organization around product management to reach their goals.
A heavy focus has been placed on providing products to customers and users, now the focus is on business users to solve their problems.
Utilizing internal product management, IT teams communicate the business outcome and business benefit as it is realized.
Prior to commencing an initiative they align with business departments to understand the amount of software they can digest in a quarter, in order to achieve a goal. They also define success and estimate the business benefit.
Once the work commences, during the sprint they test work as it is made available. And post-sprint they demonstrate success by validating that the business benefit was reached.
Technology is the future. Computers and smartphones will only become more prevalent in our lives..
The need for internal product management only continues to rise with the rising importance of digital transformation.
Digital transformation is when a company adopts technology to help it accomplish its goals.
Adopting technology into as many areas of a business as possible with the goals of enhancing how it operates and providing value to key stakeholders.
The main reason why companies embark on digital transformation relates to three main areas:
Innovation
Value
Efficiency
For example:
Innovation: using flying cars to take passengers to their destination
Value generation: enabling consumers to purchase food via the Uber platform
Driving efficiency: a government office building a digital tool to manage digital records
When embarking on a digital transformation project it’s wise to use an internal product management approach. This will enable you to be more agile, better align with business departments, and support better business outcomes.
For companies that are already transformed, they can significantly grow with an internal product management approach in the coming years.
Digital transformation has continued to accelerate over the past 20 years.
Historically it related to organizations utilizing the internet to connect their various functions to technology to leverage their operations, data, and capabilities to try digital approaches that allowed them to be competitive, adapt to changing market needs, and better leverage their data for better decision making.
While this continues to take place, especially with the onset of COVID-19, one key trend that is taking place as organizations embark on digital transformation journeys is the shift in mindset among business leaders from being project focused to product focused.
Where organizations historically used to be more output driven, now they are leveraging strategy and product management practices internally (not only for external facing products) to focus on outcomes for their business users and departments.
Outcomes that allow them to remain competitive, be efficient, and quickly respond to changes in the market.
Before embarking on a digital transformation initiative business leaders need to be aware of the key challenges that other businesses have faced in their journey.
The Panorama Consulting Group, one of the world’s leading ERP consultants and business transformation experts, published their report on common digital transformation challenges.
Their list of key challenges includes:
Lack of dedicated IT skills
Lack of organizational change management
Evolving customer needs
Lack of defined strategy
Budget concerns and constraints
Ineffective data management
Inefficient business processes
Let’s see how an internal product manager can mitigate these risks.
While product managers are a jack of many trades, they know how to work with stakeholders of various skill levels across many departments to get things done.
Product managers are not change management experts (from an organizational perspective), however they do know how to manage products and processes towards incremental improvements.
Along with this, they can rally their team around common goals and maintain motivation as they work towards success.
This is partly why product managers have jobs. They’re constantly focused on understanding the problems that customers face presently, while also anticipating problems that customers may have in the future as their needs change.
An internal digital product manager is not focused on addressing customer needs, rather their concern is addressing the needs of their business (their business users are their customers).
Product managers work with goals in mind. Goals for their product, goals for their customers, goals for their users, and goals for their business.
Digital transformation is not done simply as a marketing opportunity or to use your budget so that it’s available the following year. Rather it should be done with specific goals and measurable results.
While product managers are not always in charge of budgets they are very familiar with working within constraints to accomplish goals.
No product manager has an unlimited amount of resources and team members to work with. So they constantly prioritize and make tradeoffs to focus on the right things at the right time.
Data is the lifeblood of decision making for product managers. If data is not currently being collected or referenced for decision making then a product manager can assist with getting this initiative started.
Internal product management improves business processes by providing the right tools and aligning with business departments to understand their requirements. This leads to delivering the right products; the team may have asked for a CRM tool, however the solution is focused on the problems that need to be solved rather than simply the ask.
Having a product mindset infused in internal capabilities makes IT teams more agile and efficient and deliver value more quickly for their company.
Large IT teams are more complex, more diverse, require more effort to gain alignment, and more effort when prioritizing.
How do you determine between various initiatives which one will be addressed? Do you simply go with the initiative proposed by the one with the loudest voice in the room, or that which will involve the least amount of work? Or, do you apply a systematic method to decision making?
This is why data-driven decision making is required.
Teams will be aligned on common goals, with specific metrics defined, tracked, and worked towards to reach success.
And when there is disagreement a strategic framework can be applied to determine what the next steps should be.
Digital transformation is also vital for companies to differentiate themselves in challenging markets.
There is a long list of challenges that businesses constantly face.
This includes the security risk of the various platforms they use, to the rise of remote working due and collaboration needed due to COVID, constant disruptions in the global supply chain industry, and talent shortages.
As business leaders keep their pulse on the market and as they strive for innovation, digital transformation also enables them to make their business more efficient as a whole.
While IT teams have gained a large amount of experience with project management over the decades, a shift is taking place.
IT teams should focus on product management and utilize an Agile approach to improve their business, IT products, technical capabilities, enablement capabilities, processes, and more.
With Agile, a team works within set periods of time to deliver incremental solutions which are meant to improve products while keeping customers’ needs at the forefront.
For digital transformation the key stakeholder that would be considered is the business that is going through the digital transformation, with the customers being the different business departments, for example.
In a competitive environment with steep competition, Agile enables businesses to continue to offer the right solutions and constantly iterate to provide improvements for their key stakeholders.
Many companies utilize Agile software development rather than thinking in a fully Agile way; they don’t embrace Agile 100%.
For example it’s common to follow a Waterfall approach until they are ready for development, and will then move towards utilizing Scrum to complete development.
Product management enables IT teams to:
Be more Agile, which results in greater efficiency
Align all of their activities with measurable business outcomes
Support market-facing products, internal-facing products, and strategic objectives
Here are some other key differences between a project management and a product management approach:
Whereas with project management success is defined by completing the project according to time and resources allocated, with product management success is solely defined by value generated.
Project management has defined timelines that teams work on accomplishing. The result of this is that IT teams focus less on performance once the initiative is complete. With product management however there is a focus on the entire product lifecycle, which includes regular upkeep and improvement of the product over its entire life.
Where with IT projects the focus remains on delivering projects according to the defined scope and requirements, product management employs constant hypothesis testing, roadmaps, and focuses on value provided by the various features. So the scope can and will change when needed, and as long as there is a clear and beneficial reason why.
With a project management approach to IT, individuals work on many projects at once and there is likelihood of reassigning them mid-project. A product management approach utilizes cross-functional teams to manage one product at once with permanent teams. The benefit here is more focus towards the product they are working on as well as stability.
When project management defines the scope, builds it, and then delivers it months later without any further interactions with business users, this ultimately results in poor adaptation with their needs. Product management allows continuous interactions with business users allowing them to refine the product to their specific needs and helping shape better results. Frequent interactions with stakeholders supports success.
The work performed by the IT team is not simply a cost that is part of running the business and aids increasing expenses to pay lower taxes.
When focused on business objectives, remaining competitive, and constant areas for efficiency and improvement, there are many ways in which an IT team can tighten business processes and deliver value.
When utilized correctly the IT team becomes a team that you want to continue to invest in.
With a mindset switch to internal product management then not only can you find ways to generate more revenue, but you can also generate innovative solutions to improve the satisfaction of the employees of your business.
Revenue is missed, growth is hindered, customer churn rises, market share is lost when you don’t fully adopt a product management mindset.
IT teams should fully embrace product management practices. Treat your internal digital tools as products with measurable goals to accomplish.
There are many available tools that IT teams can utilize to solve business problems.
There are modern solutions for product managers to utilize (rather than gantt charts, excel spreadsheets, or other generic tools).
airfocus is a product management tool that is relied on by both external and internal product management teams.
It offers an easy-to-use, modern and modular product management platform and provides a complete solution for internal product teams to manage and communicate their strategy, prioritize their work, build roadmaps, and connect feedback to solve the right problems for stakeholders.
Designed with flexibility in mind, you can quickly customize the platform to fit your needs without disrupting the way your team works.
Join thousands of global product teams who use airfocus to make better decisions and build outstanding products for their teams and customers.
IT project management has long been a staple in the software industry helping leaders reach success and enabling enterprise companies to see critical initiatives through to completion.
Gather resources, craft the project plan, confirm the budget, and as work ensues check off completed items. Then celebrate with your team if the project was completed without exceeding allocated resources.
With the changing needs of today’s market a project management approach simply won’t cut it. We need to veer away from focusing on completing tasks, progress meetings, and hitting deliverables to following behaviors and measuring success based on outcomes.
Making necessary organizational changes is hard, it takes time. However, here are some actionable steps to take to switch from an IT project management focus to an IT product management focus.
This can be difficult if you have multiple internal products. Choosing external products is easier because your team has spent time and energy creating them.
However, think past simply the digital internal tools, focus on business capabilities as well.
For larger enterprises, IT teams need to look at business capabilities (which group a set of applications and solutions).
Gartner®1 explains this as “the business-owned portfolio of capabilities in the enterprise that enable the business to deliver on its value proposition and succeed in its goals or mission.”
To accomplish this it’s important for business product managers, owners and teams that are responsible for business value streams and empowered for decision making to achieve defined business outcomes across their entire product portfolio.
Once the various business capabilities are understood, they should define which improvements need to be made to achieve specific objectives. For example, increasing sales effectiveness, human resource responsiveness, collecting payments faster, etc., and define measurable improvements that can be actualized and linked to business benefits.
Scrum or Kanban? Maybe Large Scale Scrum (LeSS)? Or how about Disciplined Agile (DA)?
Move away from a Waterfall approach and select an Agile framework that works for your team (Scrum can work for smaller organizations, while LeSS is for larger teams).
One benefit of adopting an Agile approach is that the products you focus on will have dedicated permanent teams whose sole focus will be on working on iterating the product towards improvement with actual feedback, while mapping the work performed to the goals of the business.
This applies to value streams as well, which can be a set of products but also just capabilities across products. For example, a platform capability allowing billing across different products.
These stable teams will make it their mission to reach goals until the end of life of the product.
As Agile teams work on products, or business capabilities (as products), even before they get started, spell out the benefits that your business users will receive as a result.
This will help garner support from other stakeholders and as we mentioned, enable your team to see value as goals are reached.
As your team embraces a product management approach to managing internal products or business capabilities, veer away from the project management approach of funding initiatives based on defined milestones in the project plan.
Start by selecting influential business partners to boost visibility of product pilots and then use early successes to gradually reset perceptions of product funding. Thereafter, funds can be allocated based on the business outputs that are expected (and achieved).
There are a couple of ways to pitch internal product management to your C-Suite. This is important because you will need their support and buy-in.
When speaking to the CEO emphasize that product management will have a net benefit for the business as a whole.
This means that it will:
Enable digital transformation
Improve the ability to generate digital revenues
Improve efficiency
When speaking to business partners, emphasize that utilizing product management practices internally will enable customer-centric delivery.
It will:
Accelerate IT business collaboration
Promote customer center mindset in product teams
Eliminate bottlenecks
When speaking with the CFO emphasize that it will maximize funding for digital business by:
Creating continuous, traceable alignment to business priorities
Enabling flexibility for reallocation
Reducing the burden on finance teams
When speaking to the managers of various departments emphasize that there will be increased alignment between the various departments and clear measurable goals that will be accomplished as a whole, while tied to benefits for the specific department as well.
Making organizational changes is not easy, however the process is much easier when there’s an executive sponsor to champion the idea.
One way to accomplish this, tied to our next point, is by starting with a project that will lead to results for a specific department within your organization.
Understanding why the shift is needed from output to outcome focused, they will only continue to support and garner support from other business leaders once results are realized for their specific business unit via the experiment.
Pick one problem to solve for your business and start there, an experiment. While you can inform your organization of why transitioning to internal product management is a great approach, it’s more powerful to show them with tangible evidence.
Treat this work as an experiment because it’s just that, a process being followed and work being performed to demonstrate to your team how and why this works.
Once the results are realized for this experiment, the success can be used to garner further support from teams and other business leaders as you look for further business problems to tackle.
Rather than the traditional approach of having multiple members working on projects and constantly rotating, establish a dedicated Agile team that owns solving the business problem and crafting the right solution for this experiment.
Dedicated Agile teams lead to better structure, focus, and better product quality. Likewise, they constantly look for ways to improve their work processes.
With a product owner, Agile teams constantly ensure that the work is prioritized effectively and tied directly to business strategy.
Make it known to your company that this experiment is underway.
During retrospectives, business meetings, show & tells, any opportunity you receive, remind team members about the business problem that your Agile team is working on solving, and current progress.
And once the solution is complete and results have been realized, constantly communicate the story to team members. If you have an executive sponsor it’s imperative that they take part in this as well.
What business problem did you set out to solve for business users? Why? What approach did your team take? And what were the outcomes (feedback and metrics)?
This will only add to the fuel to get your organization as a whole to shift from output focused to outcome focused, with supporting evidence why this works.
Traditionally product management has been focused on external products. However, with the importance of digital transformation and the realization of value that can be achieved for internal products with an internal approach to product management, it is becoming increasingly popular and desired.
There are many key differences between a project management approach to IT and a product management approach to IT. However, there are also key differences between internal product management as a practice and external product management (we will speak about this in detail in the next chapter).
While some may claim that the community of modern product managers is not welcoming to internal product managers, this is not the case.
For example, popular Slack communities like Mind the Product or Product Collective are open to internal product managers and the community regularly assists them with their challenges.
It is true that the content and advice shared in many of these communities focus on topics related to external product management. And this makes sense, because this is where the majority of product management challenges are and the bulk of the work.
Some aversion that some may have to “internal product management” may be due to businesses overusing the Scaled Agile Framework (SAFe). In their approach to transformation they claim that they are Agile while not understanding that SAFe is not Agile. Companies embrace SAFe to use the term Agile but continue to use the same Waterfall approach to develop new products.
More on this later but if you want to switch from a project management approach to IT to a product management approach to IT embrace Agile, fully.
Product management is relevant to IT for many reasons. One of the key reasons is that it provides and ensures value along every step of the way when developing products.
IT teams have extensive experience working on grand digital transformation projects, however a shift needs to be made to view and manage them with a product management lens.
A product manager leads teams, works with leadership, and manages the value stream for the benefit of stakeholders. Stakeholders including customers, users, and their business (departments and as a whole).
Gartner®1 defines the value stream as “a sequence of business processes, people, resources and technology necessary to create and deliver a product, service or experience to a customer or citizen."
Adopt Agile Practices in Decentralized D&A to Optimize the Organization’s Value Streams, By Joao Tapadinhas, 18 November 2021
When using product management for IT teams:
There is more effective product delivery and better alignment between business users and their IT team.
Businesses are always looking for better ways to assess the effectiveness of their product delivery as well as further alignment between business users and their IT team.
In the 2019 Gartner®1Agile in the Enterprise Survey, “32% of respondents indicated that accelerated product delivery was their most important objective for adopting agile methodologies, and 27% of respondents cited better alignment between IT and the business as their most important objective. At least 60% of respondents ranked these objectives as one of their top three most important objectives for adopting agile methodologies."
Results Summary: Agile in the Enterprise, By Bill Holtz & Mike West, July 2019
Products are defined by how they are consumed and the problems they are solving rather than how they are produced and the function they offer. Who cares how many features a product has and what it can do if it is not being used and providing value?
Empowered, multifunctional teams manage products end-to-end, from strategy all the way to delivery. Having focused permanent multifunctional teams and employing strategy ensures that the right products are built and business goals are met.
Fluid roles, adaptive mindsets foster “fusion teams” that blend technology and other types of domain expertise. Teams can leverage the experience and expertise of their coworkers towards solving challenges and building solutions that lead to cost savings and efficiency.
Foundational capabilities are managed as products to foster an outcome mindset. Internal digital products are designed with the user in mind and with a modular architecture, to make it easy to adapt and build upon as the product and user base grows.
Data is utilized in decision making. Initiatives are not worked on based on a vague definition of those that are the most important, and funding will not be provided based on milestones, rather, data is used to prioritize and fund products that demonstrate value.
Products are broken down into two key categories: digital and analog products.
Digital products are further broken down into internal and external, IT products and others fall within internal digital products.
Business products fall into the category of “Others”, other types of digital products that exist besides IT products.
IT products are meant to help businesses improve efficiency, they do not only support IT teams. They generally include products and tools such as the help desk, email servers, cloud services, data security, and more.
Business products are also meant to help businesses improve efficiency, drive innovations, and remain competitive. However, the difference is that business products are created within specific departments to serve their needs and support their goals.
For example, developers within a sales team building a Customer Relationship Management (CRM) tool to assist the sales team with staying organized and closing leads. Yes, the team could use Salesforce, however perhaps it is too costly or doesn’t meet their needs.
With internal product management organizations can better leverage digital transformation and use the skills of their IT teams for not only IT related products, but business products that serve and assist business users, and of course the company overall.
Let’s face it, working on internal facing digital products is not as glamorous as working on external facing digital products.
Many product managers that speak and write about product management do so mainly from the perspective of managing external-facing products, whether B2C or B2B.
This doesn’t mean that working on internal-facing digital products is not valuable. It’s extremely needed and when done well it allows businesses to remain competitive, be efficient, and remain innovative.
For product managers specifically there is a caveat however.
Some may think that working on internal digital products does not provide you with the same amount of experience as working on external products.
Though it is clear that there are key differences between the two roles this is not 100% the case.
It’s important to understand that working for multiple departments and understanding multiple business needs can be more complex than working for a product dedicated to a specific vertical. Different work is involved.
There can be confusion regarding who the customer is for internal-facing products.
The customer is the stakeholder that pays for the product while the user is the stakeholder who is engaged with the product on a regular basis.
For an external-facing product manager work is performed to ensure that they’re building a solution that meets the needs of their users and customers.
Internal products don’t have customers, the key focus is on the end user.
The user base consists of the key individuals in the organization that will be engaged with the product on a regular basis. This includes the employees in your business, the customer service team, the finance team, etc. It depends on who you are building the product for.
While the steps of the product development process are applied, there is not as much fanfare when launching an internal product. At least not to the same extent as a product that is shared with the world and made available for customers to purchase.
The reason for this is a simple ugly truth related to internal products: many companies historically “shoved” products down the throats of their employees.
You may still prefer Slack over Microsoft Teams, but once the C-Suite made the switch to Microsoft Teams everyone had to use it.
However, with a full embrace of internal product management this can be reversed.
With internal product management IT teams work directly with business users to understand their problems and match their needs via defined solutions before development even begins. And they continue to interact with them as the product is developed (customer development).
This only ensures that features and products are built that business users can digest, provide feedback, and are enthused to use once available.
Internal product managers play an extremely vital role in building internal products for their company.
External products are built to solve customer pain points and of course earn revenue. Internal products are meant to do the same, with a slight twist.
The goal for internal product managers is to save money and enable their team members to do more with less/be more effective at their job(s).
For example, a tool for the customer service team to quickly process returns for customers.
This digital product would streamline activities for the customer success team, make them more efficient, give them time to focus on other tasks as a result, and also support customer retention and satisfaction due to the ability to address customer issues much faster.
While this product doesn’t earn revenue, it’s still tied to company profits.
This is why an approach to product management which ties delivery to business outcomes allows IT teams to explain the value that they deliver for their business.
Product market fit is one of the key goals for product managers upon the release of a new digital product.