The examples of this are unfortunately everywhere.
One of the clearest and most egregious recent examples has to be the absolute ineptitude of the leadership at Boeing with the software at the heart of the aircraft manufacturer's shocking 737 MAX crisis.2
Boeing's fundamental mistake was to consider this technology as just a necessary cost, rather than the core competency that enables them to provide the safest, most fuel‐efficient, and most cost‐effective airplanes available.
Rather than staffing an empowered product team—continuously working to provide the safest, most fuel‐efficient, mission‐critical control software—they decided to outsource this technology, thinking they could maybe save a few dollars.
It's not just the aerospace industry. The automotive industry has suffered from this mindset for decades,3 until Tesla came along and proved what is truly possible when technology is at the core of the car, rather than treated as just a necessary cost. Going far beyond navigation and entertainment systems, using technology at its core and over‐the‐air updates, a Tesla actually improves over time rather than simply depreciating. Consider that for a moment.
Pixar has shown the film industry what is truly possible when technology is at the core of an animated feature film, rather than just a necessary cost. Pixar uses technology in ways far beyond traditional film‐making, and the technology teams are as valued as the creative teams.
As you may know, Pixar is now part of Disney, and look at how Disney has embraced technology to completely reimagine so many of their existing businesses. This includes everything from their legacy theme parks to what they've recently done with the Disney+ video streaming service.
The same story is playing out in the insurance, banking, health care, telecommunications, education, agriculture, transportation, and defense industries. I could keep going.
Often, when I am having dinner with one of the CEOs from a company that doesn't get this, they'll tell me how they're not a technology company—they're an insurance company, or a health care company, or an agricultural company. I'll say, “Let me tell you what I would do if I was a product leader at Amazon or Apple, and we've decided to go after your market because we believe it is large and underserved, and that technology is available that enables dramatically better solutions for your customers.”
After describing how we would set up our teams around the enabling technology to optimize for true innovation, I also point out that, competitively, we would be betting on them not being able to respond because they would be too busy trying to protect their old business.
It's not that these CEOs don't admire what companies like Amazon and Netflix and others have done—they generally do. It's that they don't see how these lessons apply to them. They don't understand what Marc was trying to warn them about.
Of course, there are many possible reasons why the CEOs of these companies have been so slow to grok this. Sometimes, they have worked in the old world of business so long that they need more time to wrap their head around the changes. Sometimes, I can't help but feel like they are fearful of technology. Sometimes, they just seem to be resisting change. But, ultimately, these are all just excuses. The board is supposed to be there to ensure the CEO is able to effectively lead the company.
What is especially ironic is that these companies are almost always spending far more on technology than they need to. In fact, I've never seen more wasted technology investment than I find in these companies that don't understand the true role of technology.
Rather than outsourcing hundreds or even thousands of mercenary engineers—and providing them roadmaps of features from their stakeholders which rarely generate the necessary business results—I explain to them that they will receive a much greater return from a significantly smaller number of the right employees. Employees who are given business and customer problems to solve and are held accountable to the results.
One way or another, becoming one of the best companies today requires senior leaders who understand the true and essential role of technology.
The Technology Leader
One very common manifestation of how a company views the role of technology is whether the engineers building the company's products report up to a CIO (chief information officer)/head of IT, or whether they report up to a CTO (chief technology officer)/head of engineering.
This may seem like a minor issue, but I've come to realize it's a much more significant impediment to transformation than most companies realize.
With the big caveat that each individual CIO is a unique person, I share this not as an absolute, but as something to seriously and honestly consider. Also, it is important to realize that the core CIO job (managing the IT function) is both important and difficult.
But here's the problem: the CIO truly is there to serve the business.
The very traits that make for a strong CIO can easily end up undermining the company's attempts to transform.
That's my theory for why I've found it very difficult to get CIOs—even strong CIOs—to appreciate, much less adopt, the mindset, methods, and practices of product engineering organizations.
What's especially problematic is that product engineers—the type the future of your company depends on—are rarely willing to work for a CIO because they know this difference in mindset is extremely important.
Engineers in a CIO's organization play a very different role than engineers in a CTO's organization. It's the difference between feature teams and empowered product teams.
In some cases, I've encouraged the CIO to retitle as CTO (because I believed the person was up to the challenges of this much larger role), and in other cases I've strongly encouraged the CEO to hire a true CTO to lead product engineering.
Notes
1 1 https://a16z.com/2011/08/20/why-software-is-eating-the-world/.
2 2 https://www.bloomberg.com/news/articles/2019-06-28/boeing-s-737-max-software-outsourced-to-9-an-hour-engineers.
3 3 Bob Lutz, Car Guys vs. Bean Counters: The Battle for the Soul of American Business (New York: Portfolio/Penguin, 2013).
CHAPTER 3
Strong Product Leadership
The heart of this book is the importance of strong product leadership.
To be clear, by “product leadership” I mean the leaders and managers of product management, the leaders and managers of product design,1 and the leaders and managers of engineering.
For this discussion, I will distinguish between leaders and managers. Certainly, many leaders are also managers, and many managers are also leaders, but even if both roles are covered by the same person, there are different responsibilities.
Overall, we look to leadership for inspiration and we look to management for execution.