Internal Product Management

White Paper

Product Thinking
When delivering internal products (platforms,
packaged software, hardware) to your business

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Summary
Many IT, Development, and Product teams are focused on delivering internal products. Platforms, packaged
software, hardware, or custom solutions that underpin the products sold to customers or help employees do
their job. They are often stuck serving the businesses – trapped in a world of disparate applications, technical
complexity, demanding stakeholders, projects, deadlines, and changing priorities. Always under pressure to
deliver and unable to get ahead of the game.

Here's how they might escape… with a product thinking mindset shift.

Product thinking for internal products

Product thinking is at the core of most businesses. It's about having standard products that you build once and
sell many times. Companies love this because, as a business model, it's very efficient - it brings economies of
scale that maximize profits.

But product thinking isn't often applied to the internal products in an organization – products and platforms that
solve real business problems and provide real value for your internal stakeholders.

What's more, by default, internal products are often managed by IT teams – as part of a large estate of applications.
And, IT teams typically apply their existing operating model to hit project-related delivery objectives – rather
than driving the roadmaps and strategies you need to maximize business outcomes and value. They are seen
as a cost center, not a source of strategic value.

This is important, as although your customer-facing products generate revenue, it's your internal products that
underpin business success.

From siloed applications and

reactive projects to a product focus

How does product thinking help?

Product thinking and the discipline of product management help you tackle the following challenges:

How do you proactively manage internal products to provide a sustainable service to the business? So, moving
away from just delivering something on time to thinking about the whole life cycle.

How do you achieve a more commercial focus that drives business success and saves money? The answer
includes moving from a 'project' mindset of one-off solutions to a 'product thinking' mindset.

How can you change the focus from output-driven (i.e., when will the next feature be ready?) to outcome-driven,
where you help internal stakeholders realize the maximum business value?

How can you take on more of a leadership role to add value to the business? Of course, you need to respond
tactically to short-term needs, but you also need a longer-term strategic view as the company develops.

This white paper helps you explore what this can mean in your business.

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Managing internal products
What is a product?
Before exploring internal product management, it is useful to take a step back to explain what we mean by a
'product.'

Many outside of technology have a simple understanding that a 'product' is something tangible (something you
can hold in your hand). But this definition is quite limiting and doesn’t work well when thinking about most IT
products – after all, you can't 'touch' software. And many companies sell Software as a Service (SaaS) products.

A more useful description is that a product is something that can be delivered multiple times without having to
build from scratch each time. It multiplies the value of a delivery – its adoption can scale up without needing
to build something new for each user. Therefore, the original development cost is spread over all the product's
users.

This doesn't imply that products are unchanging. Indeed, it is likely that the product will evolve to support
different types of users – or different usage scenarios.

It is also likely that the product will be augmented with add-ons and configuration options, which means that it
better suits customers' needs.

The product itself might be hardware, software, or professional services. And it might be built in-house or
sourced from a third-party. Sometimes, it can be a combination of all these things.

Who are the customers of products?

The most common scenario is that customers of products buy from a third-party (a supplier). For example, a
warehouse operator buys a stock management system from a software company. Or a consumer buys their TV
from an electronics store. But there are other types of customers, the internal ones. These customers are people
working in an organization who take products from an internal IT Development or Product function.

In many organizations, ownership and management of 'internal products' has been down to the expertise and
diligence of IT. Although capable and willing, many have lacked the insights, tools, and approaches to make this
management effective. Indeed, they may also be restricted by the IT operating model. Other organizations have
product managers in place to manage both external customer facing product and internal products.

Table: Examples of external and internal products for a supermarket's technology portfolio

Typically managed
Used by Example Products
by

Online Shopping, Rewards,

External Products Paying consumers Product Managers
and Loyalty Programs

Supplier Management,
Inventory Management,
Employees, Delivery IT, Development
(employee use of
Internal Products Partners, Inventory or internal Product
e-commerce platform),
Suppliers Managers
scanner and receipt printing
hardware, laptops

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Internal products are often critical to the business
At Product Focus, we see many types of internal products.

For example, the internal platforms that underpin the products sold to external customers, such as an e-commerce
platform or billing system.

Software services aimed at particular business functions, e.g., Enterprise Resource Planning (ERP) systems like
SAP or financial management systems like Sage. Or generic 3rd-party products like laptops or mobile phones.

Some will be custom-built or adapted (which means there will be development work), others configured for the
business, and others adopted as they are.

Even though they don't directly generate revenue, they are often critical to the business and, if not appropriately
managed, can frustrate plans and impact profitability.

Models for managing

internal products - IT projects
The traditional model for developing
internal technology is one where
someone in the organization says,
"We need this." The budget is
secured, and the IT or Development
team 'gets on and delivers it.'
Products sold Unique customer External Product
It's a project focus – each request to customers solutions Management
is taken separately. The internal
customer places an order, and IT or
Development provides a service and
deliver what was requested.
Platforms used
In this model, it is assumed that by the business
the internal customer knows what Internal Product
Internal IT projects
they need, that their requirements products Management
don't change, and that success is Products used
delivering as much as possible as by employees
quickly as possible.

It's a world often challenged to do Project focus Product focus

more with fewer resources, e.g.,
budget cuts, rather than how we can
invest in building capabilities that
enable greater value to be delivered to the business.

Internal users are often treated as second-class citizens. They may have to deal with a terrible user experience,
and no one thinks it's a priority to improve things. But, although the system works at some level, the overheads
and operational inefficiencies created can raise huge hidden costs. Sometimes, whole jobs are dedicated to
copying and pasting data from excel spreadsheets into antiquated systems.

The second model is a product-focused approach

It assumes that an internal customer request is important but one of many and that it's impossible to do
everything for everyone, so priority calls are necessary. And helping the internal customer to articulate and
make sure that what they're asking for delivers a measurable business outcome is part of the job.

It recognizes that someone must take a balanced, objective view across the organization – and think about
the cumulative impact of all internal customer requests. Additionally, they must consider the impact on existing
technology infrastructure and long-term support.

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Why?
As there are always limited resources, someone
has to work out:

Strategic
• what gives the most significant benefit to the The product
business approach
• what are the impacts on other systems and
users
• what the long-term costs and plans are to
support and maintain what's delivered
• what's most cost-effective overall

This is the product approach for internal product Siloed

Tactical
management. It's product thinking for IT. approach
It's about moving away from a siloed approach to
a more holistic approach that brings more value
to the business (and, in turn, makes the role even Value to business
more important).

How do you measure success?

It's important for you and your sponsors to put something in place to measure whether the product approach is
being successful.

If you've used a business case to justify the delivery of an internal product, then measuring how you're doing
over time against the business case forecast is one approach. But what metrics should you use?

The answer is the metrics that make the most sense for your product and that are most helpful to your business.
The metrics might fall into areas like user behavior (e.g., takeup), cost saving, efficiency savings, uptime,
compliance or security.

For the platforms that underpin the customer-facing products, can you make a link to creating more revenue or
having less cost? For example, scaling up transaction volumes so you can take on more customers or having
a more stable platform, so you lose fewer customers. Maybe the business cases that exist for the external
products based on the platform already contain costs for platform development – or if they don't, they should.

Often the argument is that if we do nothing, there is an increased risk of a bad thing happening. For example, if
we don't tackle technical debt, the whole platform may collapse with the next update! Or if we don't stop 'shadow
IT' (where departments are buying their own laptops), we can't implement effective security solutions and risk
the whole company being compromised. Painting a picture of what would happen if the platform collapsed or
there was a serious data breach can very quickly focus decision-maker's minds.

Reducing time to market for new releases, business agility, or the ability to support longer-term product plans
can also be very important but are tricky to measure.

Of course, success is not just down to what you're doing in product management – it's based on the performance
of a cross-functional business team, ranging from Development to Operations. Objective Key Results (OKRs)
may be a good tool to use to get everyone pulling in the same direction.

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The focus of internal product management
We see four key areas of focus, as shown in the dials below:

Purpose – from 'feature factory' to

'outcome focused'
In many organizations, the IT team is given Purpose Leadership
requirements by internal customers and told to
deliver them. There may be little questioning of
whether the requirements are truly valuable, e.g.,
using discovery techniques to work with users to
research the best solution.
Output Outcome Tactical Strategic
driven focused (short-term) (long-term)
Similarly, using techniques like MVPs (Minimum
Viable Products) and agile methods to evolve to
the right solution may not be embedded as a way
of working. It requires ongoing and close contact Ownership Commercial
with the end users and the willingness to take time
to explore options from both sides.

For example, if the KPI (Key Performance Indicator)

for IT is about how much stuff is getting done (and
how quickly), that will drive output-driven behavior. Build or Develop, in-life Custom Configure
install only and support
If the business uses OKRs, which help align
business outcomes across teams, then that should
drive value to the business more effectively.

Leadership – from 'order taker' to 'trusted advisor'

With a product approach, the IT, or technical team changes from an order-taker to a trusted advisor. It moves
from the short-term view of reacting to a business request to considering long-term strategic value.
The product approach promotes more holistic thinking. For example: how each request supports long-term
business goals; how we aggregate similar requirements more efficiently; how to deal with the risk and cost of a
critical 3rd-party supplier letting us down; how we best align our infrastructure and support needs; what is the
long-term roadmap for this internal product to support our strategy?

It's about having a more balanced view of internal products. A view that considers the technical issues, our
customer and commercial constraints, and operational issues. The balanced view helps us to make objective
strategic decisions – that are best for the business.

As a trusted advisor, you can ensure difficult priority decisions are made – changing discussions from we want
this, this, AND this to we must choose between this OR this OR this.

Ownership – from 'hands-off' to 'full lifecycle management'

In some organizations, all IT or Development does is build or install something, and then another team, like
Operations, must support it (and fix any problems). Often nobody has considered the need for long-term
management of the solution. Everyone has assumed once it's delivered, it's finished. Bugs and enhancements
are an afterthought for which no one has planned.
Internal product managers consider the full lifecycle of a product from development and deployment to in-life.
They also consider what will happen when a product needs to be withdrawn, and internal customers migrated to
something else. Unlike those product managers selling to external customers, internal product managers don't
have the option of telling the customers to 'sort it out themselves!'

So, genuinely owning the product and in-life management through the full product life cycle results in higher
quality, thought-out solutions for the business.

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Commercial focus – from 'custom' to 'configure'
The tendency can be to treat each internal request as a separate requirement and to build a unique solution for
each internal customer. That becomes inefficient as you multiply the number of solutions you need to support,
as well as being slow and costly to do.

The product approach is more efficient. Here, you move from frequent code customization (a project approach)
to using or creating standard products that are configured for different users.

Making strategic build/buy/partner decisions (on what's best for the product and the business) is also critical.
Here product managers consider the options of building to add long-term value to the company, buying
commercial off-the-shelf software (COTS), which is readily available and more cost-effective, or partnering
where appropriate.

Another key commercial area is driving a better deal with suppliers by aggregating demand from multiple
business areas. Internal product managers have a view across the entire business and are well-placed to
manage this.

If a company has internal products - it's already doing some product management!
One of the first things to realize is that you don't need to have the title Product Manager to do product
management.

In many organizations, product management doesn't exist as a function, but plenty of people are doing the work
to manage products. A start-up may only have one product and no product managers. The senior management
team does most of the product management activities, e.g., working out the sales proposition, setting pricing,
and deciding what to build next. In other companies, there are Service Managers who pick up some of the
activities Product Managers typically do.

So, if a company has internal platforms/products, software services, or 3rd-party products – someone must be
planning what to do, building or buying them, deploying, operating, and supporting them. But, they may not
think of themselves as doing product management.

Some things to consider…

Internal customers are difficult different
They know where you sit. They work in your company. You typically have many of them, and they might be
peers (or senior) to your boss. They expect to get what they ask for.

To relieve the pressure, recognize that saying 'Yes' to them means saying 'No' to someone else. Introduce
transparency into your prioritization process – everything goes through the same process, which helps you
make objective decisions. And work on communicating your plans, so you're not springing surprises on
senior stakeholders (they don’t like that).

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What product activities need doing?
Product Activities Framework for internal products
Our Product Activities Framework shows all the activities that should be taking place in any company with
products. Most of the activities you do to manage products sold to external customers are equally relevant
to internal products. The key difference is that you are dealing with internal customers rather than external
customers, and no money is changing hands.

Depending on the type of internal product, some activities will be more important than others, and some will
only be relevant in certain situations.

We've created a version of our Product Activities Framework for internal products, as shown below.

Strategic Product Activities

- working out what the right internal product is for the business

Insight Analysis Direction

Technology research Internal segmentation Product strategy

Internal customer research Propositions Vision & evangelizing

Competitive benchmarking Positioning Roadmaps

Product performance Business cases Internal accounting

Inbound Activities Outbound Activities

- helping the business to deliver the product - helping the business to use the product

Product discovery Internal launch

Requirements Documentation and training

Design and delivery decisions Operations

Operational readiness & trials Support

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 Strategic Product Activities
- working out what the right internal product is for the business

Insight
Technology research: Researching and gathering For example, understanding the landscape for
information, expert opinion, and insights. Tracking market 3rd-party solutions in a particular area.
drivers and trends such as technology developments.

Internal customer research: Collaborating with internal

For example, observing long-term trends from all
customers (users and other stakeholders) to understand
business units, getting feedback from Operations
high-level requirements and priorities. Understanding
and Support, tracking satisfaction, and other quality
longer-term needs and where something fits in the overall
metrics.
value chain.

For example, investigating other 3rd-party systems that

Competitor benchmarking: Monitoring external (and internal) could be used instead of current solutions. Monitoring
competitive offerings, including benchmarking and tracking. 'shadow IT' (non-authorized solutions that internal
Understanding strengths, weaknesses, and direction. customers have sourced themselves) and other
workarounds to understand why they are chosen.

Product performance: Reviewing data and reports on For example, monitoring platform performance,
performance, including analytics, to understand product tracking KPIs linked back to a business case and
usage. monitoring adoption rates.

Analysis
Internal segmentation: Identifying internal customer groups For example, segmenting within the business by
that need the same solution. Understanding the size and specific needs and understanding the numbers of
urgency of the requirements of these groups of users or potential users (e.g., providing different laptops to
internal customers. different user groups)

Propositions: Creating and capturing new ideas. Analyzing For example, creating different propositions for
and building propositions for the target internal segments. internal groups based on the same technology.

Positioning: Determining appropriate messaging and

For example, how to persuade IT users to use
positioning against alternative external solutions or internal
company-provided products rather than shadow IT.
solutions.

For example, comparing external options and

Business cases: Writing the rationale for the company's producing the financial model, including costs and
investment in a platform, software service, or 3rd-party solution. savings forecasts. Getting impact estimates and buy-in
from relevant areas and stakeholders.

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 Strategic Product Activities (cont’d)
- working out what the right internal product is for the business

Direction
Product strategy: Developing internal product strategy and For example, selecting a single solution for use
plans. Updating management and the wider business. across the whole business.

Vision & Evangelizing: Creating a compelling internal product For example, telling the story of the importance of a
vision. Selling the vision to internal audiences, including key platform to the business. Explaining to users the
stakeholders and users. value of a proposed internal solution.

Roadmaps: Deciding on the future direction and priorities for For example, regular alignment meetings of the
the internal product. Publishing and maintaining roadmaps for platform roadmap with the product managers (of the
users, management, and other stakeholders. external products) that are using it.

For example, how development work is

Internal accounting: Developing and running an internal
cross-charged across departments – and how the
charging model (if appropriate).
finance team treats it.

Inbound Activities
- helping the business to deliver the product

Product discovery: Gaining a deep understanding of what’s For example, structured approaches like prototyping
valuable to users by exploring a known problem space to define and test ideas with internal users.
and validating candidate product concepts.

Requirements: Gathering, analyzing, prioritizing, and For example, platform requirements like performance
documenting internal product requirements. Defining users or scalability. Providing context and discussing
and use scenarios. trade-offs with developers and internal customers.

For example, using iterative agile development to

balance development cost, risk, and speed to meet
Design and delivery decisions: Designing and delivering the
business requirements on features, performance, and
optimum internal product for the business. Making the build,
user experience. Making the trade-off between
buy, or partner decision.
dealing with technical debt or developing new
functionality.

Operational readiness & trials: Managing the roll-out of the

internal product, e.g., system and process updates, so the For example, managing an internal trial.
internal product is ready for the business to use. Finding,
managing, and negotiating with partners and suppliers.

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 Outbound Activities
- helping the business to use the product

For example, selecting launch timing, planning for

Internal launch: Creating and running an internal launch.
the training of internal users, and building momentum
Supporting the adoption of the internal product.
across the business.

Documentation and training: Creating guides and

For example, user guides, product descriptions,
presentations to explain how to use the product to internal
FAQs, online updates.
users and stakeholders.

Operations: Ensuring the internal product performs at the For example, monitoring performance, Service Level
required levels Agreements (SLAs)

For example, first, second, or third-level support

Support: Providing ongoing support to internal users
depending on the product.

You can use this tool to check who owns which activity or work out what you need to spend more time on as
an internal product management organization.

Summary
We see a growing trend to adopt 'product thinking' for the management of internal products because of the
huge benefits it brings to a business. It's about focusing on building something once and having it used many
times, rather than creating lots of customized (and often flaky) solutions – that are costly to support and maintain.

It's about being proactive and providing leadership rather than constantly fighting fires. It's about having a
balanced and long-term overview of internal products – understanding the technical and operational issues
and the commercial constraints. This helps you make holistic, strategic, objective decisions on what's best for
the business. Finally, it's about understanding the internal customers and business well – to ensure that your
internal products deliver the right business outcomes.

Ultimately, your customer-facing products generate revenue, but your internal products will throttle your
business agility and reduce profitability if you don't have a product focus.

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 Helping you and your
business
deliver world class
product management

About Product Focus

Product Focus are global thought leaders in product management and
European leaders in product management/marketing training and consultancy
for technology-based products.

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P005-2210