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Projects-to-Products: How Did We Get Here?

By Brian Nathanson posted Oct 01, 2019 05:19 PM

One of the primary drivers for many organizations to move toward a product-based organization is to get to a model that encourages consideration of the total investment lifecycle and total cost of ownership around their technology investment -- but have you ever wondered how we got to a place where the setup investment (e.g. project) got so disconnected from the operational spend? Historically, fixed assets were purchased based on justification around their entire cost -- you wouldn't create a "setup asset" and an "operational asset."

So what happened?

It's probably difficult to pinpoint a specific set of circumstances that led us here, but I do have a story/urban legend to tell that sounds as good as any explanation I've heard for how we got here:

I asked an industry analyst with longtime program management experience "how we got here" -- with operational spend so disconnected from project spend -- and she surprised me by stating that she (and her past colleagues) were probably to blame for that schism. You see, she was in the IT department at Intel in the early-to-mid-1980s -- back when Intel was THE hot company. At the time, the best and the brightest technology minds from around the globe had migrated to Intel to be a part of the microcomputer revolution.

Very quickly, the executive management at Intel realized that they would benefit from centralizing their technology investment decisions. Since each division operated as its own business, there was bound to be duplication of effort as each of the talented division leaders committed to similar activities in response to industry trends. So Intel established the first modern centralized IT department -- where all technology investments would be executed. Guiding the activities of this new centralized IT function was a steering committee of each of the business divisions leads -- all of whom were very strong technology program managers in their own right. As a result, there was general understanding and agreement on the long-range impacts of any particular technology investment and the team worked well together to move Intel forward.

Sounds great, right? So how did we separate project and operational spend?

Well, remember that Intel was THE hot company at the time and everyone in Silicon Valley wanted to copy what they were doing. As such, Intel's "best practices" became the subject of many analyses by consultants and academia about how to run a successful technology business. Many of these analyses focused on the unique centralized IT structure that Intel employed -- without paying as much attention to the strength of the steering committee that guided the central IT group. Many replications later and the spirit of the change was lost in favor of the pure structural concept to centralize IT away from the business. The rest, as they say, is history.

As mentioned above, I have no idea whether this is the key contributor to our current situation, but it sounds as good as any explanation. Feel free to jump in with other explanations or other factors you'd like to throw out there in the comments.