RUS

16 October 2018

JetStyle: Product vs. Project: The test of Freedom

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What is the difference in approaches, their specific joys, and problems?

From the personal experience of Alexey Kulakov, CEO at JetStyle digital agency and product development director at Ridero publishing service.

For several years of simultaneous work as a director of JetStyle production studio and a product development director at Rideró, I have personally experienced the difference between the product and the project businesses. I have spoken about my findings a couple of times at various IT gatherings, and that’s how this article was born.

It is believed that the creation of a product is such a "deep ocean" full of freedom, unexplored spaces of new possibilities, and romance. While the development of individual projects is a business for those who don’t want to take risks. For me, it translates like this: in the project business, money is small, understandable and relatively predictable, and in the product business it’s long, unclear and risky. But the main difference is not about that.

A product is always a story about creating a machine from interfaces, people, customer service processes. This is a thing, which should technologically and cheaply deploy the process of success to the whole world. The keyword for the product is scaling. Don’t want to scale – don’t make a product.

And the project business is about the fact that you have a favourite team that accumulates some kind of competence and gives access to this competence to their respected neighbours. For me, the project business is the way to live life. You can build a company of like-minded people around yourself. You can organise everything around yourself the way you like it, and live in this created world, stay relevant, change with the team.

A product is a way to conquer the world. It is much more difficult to predict, it doesn’t have to be like you. And actually, if you do everything correctly, a successful product should outgrow you one day. In other words, one day you will become irrelevant for the tasks that the product will be facing. Simply because at the next stage of development, the business will need people with other competencies. And you will either have to change yourself ruthlessly, or get out of business, or disfigure the business to your inadequacy and incompetence.

As I mentioned earlier, I work as a director of a large custom development studio and at the same time as a product director in a startup. Therefore, I will try to show the difference between these two very similar, but at the same time, very different spheres. What are the joys and challenges they hide and who should do what within each of them.

 

The management object

 

Let's start with the fact that the manager in the project and in the product directs attention to different things because they manage different objects.

In the project business, the clients' projects going in a certain rhythm become such an object. But sooner or later, each of them ends. In the product business, we organise processes. A product is such a set of processes created to be infinite.

If you suddenly decide to launch a product inside your project business, the first thing you need to do is to build a concrete wall between the projects and the product. Because otherwise more predatory projects are guaranteed to devour young and still defenseless processes.

Here's how it happens. In the very first days of the startup, a project manager will come to you with the words "A client came to me, gave me two million dollars, I need a developer". You need to really, really, really believe in your product, to tell this manager to get lost. Because if you give him or her the developer for at least a day, it's all over! There won’t be a product. Other managers will get in through the hole in the dam. And your idea will remain an idea because people will continue to do projects.

My way of building the wall is to give the product a different ownership structure. The product and the projects shouldn't belong to the same people. If the developer belongs to the product, then I can’t just take him or her for the project – I have to negotiate it with the partners who are interested in the product development.

 

People

 

The product is much more of a business than a project studio. It is a system that is created to take over the world. So, sooner or later there should be an opportunity to separate the product from the founders. At least, in order to ensure that its shares can be traded. A machine made of people in the form of a sales funnel – that’s what the product is in most cases.

Doing projects is not quite a business. It’s difficult to scale, it’s always localised to some extent and strongly attached to particular individuals. It's not very clear how to tear it away from the core of the team or how to sell it, for example. You can still earn money that way, though. But it makes sense if you like people and the process of solving a variety of client’s tasks.

The project studio is, first of all, a story of personnel. For the first ten years of the director's work every time someone quit, I felt like Prometheus, from whom a bloody eagle tore a piece of liver. Tore and dragged somewhere like Yandex or other top companies in Moscow.

Then I realised that people will work for you, as long as you teach them. More precisely, as long as they see that they can learn something more valuable here. The project business needs to be built in such a way that people always have tasks in the zone of the nearest development. You hire people, they get stronger. And as long as they get stronger, they will stay with you.

The problem is that sometimes people outrun the development of the business – they get stronger and smarter faster than the new places in the team, where they could do more difficult tasks, appear. And then they leave, and there's nothing you can do about it.

 

 

The structure of responsibility

 

For the project work, clients are the best people. Seriously. And not because they pay money. It is the client who takes full responsibility for choosing the target. And for you to feel good, you just need to do the easiest thing – to be honest, predictable and extra competent. After all, the client took the most difficult part of the job: they decided where you need to go.

In addition, in the project business, you and the client are on equal terms and you can act as partners – two independent, adult, responsible subjects who can agree on common goals and ways to achieve them. In fact, it's half of the joy, if you know how to do it.

If no one holds the target frame, you feel an enormous pressure – the world presses on you. There is no one between you and the terrible space. In the product, if you chose the target incorrectly or, God forbid, chose them more than necessary, everything will end badly.

When you are left without a client who makes such decisions for you, for the first time, it turns out that this is a very heavy responsibility. Only at this moment, it becomes clear that choosing the goal is not only opportunities and freedom but also a terrible pain in the arse, an ongoing argument, and schizophrenia of the team. Then you get used to it, of course.

In the product, you are in charge. Here you can’t treat clients as equals – there are too many of them. By listening to each of them, you can get confused by conflicting demands and expectations. And the customers are not ready to take responsibility, they want to have fun, that's all.

Only your team is responsible for everything: for service, payback, and scalability, for priorities and for choosing between fast money and strategic development. It is important not to allow leaks of money, users, and responsibility.

Unlike the project business, the product is a bundle of processes that must be run simultaneously. It's not enough to just develop an interface, write and test the code. If you have released a new feature, the changes must simultaneously affect all the processes: development, production, technical support, sales, finance, and lawyers. Otherwise, money and loyalty of customers will leak into the gaps between the processes.

 

Marketing

 

The main thing that you should understand about marketing in the project business is that there is almost no marketing in there. There is a frontman who sells. And at first, he or she does it better than the entire marketing complex. If it’s not like that, there are simply no sales. It's not difficult, but there is one problem: sooner or later the frontman will end. And when it’s over, it’ll turn out that you haven’t got your marketing.

You were selling by using your personality, without any marketing process. And all you have from marketing is PR. This is at best. Yes, it is useful, you get customers coming from it. But PR is a different, mainly local tool, it doesn't scale well and exists around the talent and connections of individuals. It is difficult to manage and it doesn’t really help in entering new markets.

When you finally decide to enter a new market, this difference will become obvious. You will understand that the leads are very expensive. But this is not a problem if you have a high bill (confirmed by reputation, but unfortunately, in the local market). A much more serious problem is that new clients from marketing will be cold prospects, and they will be difficult to turn into long-term clients.

The problem of the product is completely different. Usually, from the very beginning, the focus of your attention is on the effectiveness of your marketing machine. If you did everything right: set up unit economics and learned how to calculate it, found your effective sales channel and built a machine for creating customers, then sooner or later the market will end. That's the problem.

By working in the project business, you get used to the bottomless market. Therefore, when this happened to me in the product business for the first time, it was completely unexpected. What do you mean you can’t bring even more customers per month? Why? Because you have built a machine, and it’s effectively eating up the channel. It's not that there won’t be customers at all anymore. It’s just that the rate of growth will slow down significantly, and you will have to do something with your plans for permanent extensive growth.

How could this be prevented? Change the product, find new niches, create a new value, build a new channel. Then you can enjoy the growth for some time until this niche is over too. And this will happen all the time. But you will get used to this as well.

 

Time management

 

The main difference between the project business and the product one is the way the time is arranged in them. In the project business, everything is subordinated to the cash flow balance. Your mood and the state of the business by the end of the month will depend on how much money you have spent on wages and so on, and how much you have earned.

By the payday, your employees turn from almost family members into a barrier troop that is breathing down your neck and watching whether you have enough money to pay for their work. Especially at the beginning, when you haven’t learned how to cope with the rhythm of projects confidently yet, and each project has its own specific rhythm. Roughly speaking: you get an advance payment, first, you live on it, and then you can’t wait to receive the postpay.

The most difficult time is before the final project delivery when you already have your expenses but haven’t been paid for the work completed. If you do nothing with the projects, then the rhythms of all projects will synchronise, and one day it will turn out that right now you are waiting for payments from all the projects at once, and you are in a big debt.

In such circumstances, even a small delay in payment turns into a huge problem. Therefore, the main task in managing the time of the project business is to desynchronise the rhythms of the projects. It is necessary to make sure that payments for one project compensate for drawdowns in the others.

In the product business, time is subordinated to the rhythm of the client’s processes. Therefore, existing metrics will have to be analysed daily, weekly, quarterly – all the time. You will set up a lot of analytical tools, but it won’t seem enough.

Analytics in the product is like a delicious orange, you can’t stop deepening it. And besides getting the knowledge in each of the processes, you do two things: accumulate the tempo and reduce friction. In general, you optimise everything. And how to do it – is a topic for a whole book.

 

Life stages of the product

 

I got used to treating the stages of a business’s life as breakpoints on the investment return curve. A graph like this. It is smooth on the picture, but in real life, everything, of course, is much bumpier.

Let's take a look at the points on the graph:

1. An idea – here you started to spend money.

2. You started to take money from the client.

3. You get as much from clients as you spend.

4. Here your business got profitable.

5. You have reached the limit of the channel effectiveness.

6. Your business started to die (if you didn't manage to grow the next version of it inside of it).

 

The birth stage – from idea to MVP

 

Almost all startup conferences are devoted to the birth stage. And often their participants think that a startup is only about the birth. Until the project came out, you have the most fun time when you do everything at once: testing the idea and sales, recruiting employees, developing UX and so on. Fun, creatively, the "spirit of the startup", and all that stuff.

All this is good, but the main thing is to make sure that you have enough faith and will to carry the idea all the way through until it gets profitable. My main conclusion at this stage: if you don’t have an entrepreneur who devotes themselves to bringing the product to life, or you don’t have a team lead, who can keep an eye on programmers, just don’t do the business. And yes, a hired director is not an entrepreneur.

 

The childhood stage – from alpha to stable sales

 

At this stage, the product turns into a process of applying value, already packaged in software and marketing for selling it to customers. The main problem is a lack of concentration. You will be defocused by a lot of factors all the time.

To do functions for one group of clients or for another. To focus on sales or on convenience. To deal with suppliers or to improve the quality of service. To raise prices or to do a big project for an important client. But the most important thing is a constant conflict of tactics and strategy.

At the same time you will need to:

  • Develop a project to take over your current (and next) market;
  • Earn money for this development.

And the most unpleasant thing is that you will never know for sure what is more important: to earn money now or to concentrate on development. Well, actually, it will always be clear that the development is more important, but you will also need the money very badly.

The saddest thing is that the money from the investor, which, it would seem, could solve this problem, will only make the situation more difficult. Prior to investment, the need of earning money was keeping you from making stupid decisions. As soon as you get extra money, you have a lot of “great” ideas on how to spend it.

It is very dangerous not to rely on the real needs of the business today – you can go into dreams and lose touch with reality. And just to waste money and never get profitable.

It is very dangerous not to engage in strategic development. So you can miss your opportunity and overlook the moment when you could take over the market and turn your business into a local one.

There is no reliable rule on how to choose between these two priorities. But besides them, there will also be a huge pile of ideas of what else could be done. If you succumb to them and will develop "side branches" – you will certainly lose your tempo. That is why the main challenge of the product director is to get rid of everyone and everything that is not the focus of your business. And the main problem and the main risk is how not to make a mistake in choosing it at each stage.

 

The independence stage – from sales to self-sufficiency

 

When you get into the product business, you will think that it will be difficult at first, you will have to work really hard, and then it will get easier. This is only half true. It will surely be difficult at first, but it will never get any easier. If it gets easier, this means that the product has stopped developing. Therefore, the illusory hope of rest will remain a ghost.

 

And one more time about ambitious goals and focus

 

If you do the business, you have an ambitious goal. But sometimes the second ambitious goal breaks in and defocusing occurs. What does it mean? That you as the director have failed to perform your duties and didn’t tell someone to get lost in time.

Usually, it happens like this.  Someone from the board of directors or a valuable client, or a smart colleague approaches you. And they say: "Let's do an awesomely useful thing in the project." Mind you, no one comes with a stupid thing (those who do are actually the easiest to get rid off). And if you agree, you will do a very useful thing, will make money, but will miss the pace of your product.

The idea arises: why not to tell everyone to get lost without even looking? The answer is because one day your product should change. And you must understand this not at the time of the change, but at least, several months in advance. How to understand what kind of changes this is: a turn (a key change of the product that will create a new value in conjunction with a new channel) or a side quest (a side task that will only distract from the goal)? It is very important to understand this, because it is necessary to make a turn, and harmful – a side quest.

If this the turn, then the first ambitious goal doesn’t exist anymore. Now you have another ambitious goal. Unfortunately, usually, it’s not like that. Most often, this is what happens: a partner approaches you – an intelligent, competent person. And they say: “The time is precious, we will be pursuing two goals at once, otherwise competitors will overtake us ...".

I'm an idiot. I twice agreed to two goals at once. Don’t do like I did. (Yes, I know that this sounds like “flap your arms faster and you will fly”. Which is absolutely right and absolutely not achievable in practice. So I'm writing this to the future myself: “Dear future Kulakov! Please, don’t ever try to pursue two goals at once!" )

In order to pursue two goals at the same time, you will need two teams. And having two teams is not twice, but three times more money needed. And this is just an optimistic estimate. Because you will have to coordinate the teams with each other, and this will cause additional expenses. And yes, at first there will be not an increase, but a slowdown. Everything is just like in the old good “The Mythical Man-Month”.

But if you still decide to pursue two goals at once and everything will go wrong, never say afterwards: “I’ve screwed up in business" Say: "We have gained a valuable experience." Everyone says that.

 

Projects or product – how to choose

 

If the phrase "I want to change the world" is not a pathetic slogan, but a particular need for you; if you really have an idea that it would be cool if people start doing something differently (here is how to check it: if you do not have to earn money, will you want to do it anyway?); if for some reason you really want to conquer the world – go to the product business.

If you just want an interesting job; if you want to always have actual tasks, if you want people to look at you as a professional, and to work next to the dudes you find interesting, – go to projects.

You can also do both (like myself), but I wouldn’t recommend it to anyone, because very few people enjoy a sixteen-hour working day.

 

 

 

 

 

 

 

 

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