Many companies have launched their own in-house software companies to develop new products for the market. While this is a great idea, there are significant risks and pitfalls for what ends up going into a new business.
Your company may be one of hundreds that have added a software component to their strategy to create software products that can be sold to existing customers or perhaps new customers. The motivation for this strategy is generally strong. Digital products and software can provide consistent, recurring revenue with minimal additional cost. While there is a fixed additional cost to sell another product, machine, or hour of your staff’s time, adding another user to your software platform generally requires little additional cost.
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However, as companies further along this path can attest, adding software to your portfolio is no easy task. Here are three pitfalls many businesses have encountered and how to avoid them as you begin your journey.
Software always has rules
Many companies mistakenly assume that software isn’t bound by old-fashioned rules about bringing products to market, like having a product owner, managing a thoughtful release schedule, and following a consistent approach to building the digital product.
Suppose you assume that all you need are excellent technical resources. In this case, you’ll soon discover that your product is a mess of great features at various stages of functionality, all lumped together in an unconnected, disjointed mess.
Simply because you’re operating in the digital realm, you still need a strong product owner who can determine which features and functionalities are built when and who can manage the integration points between them. Likewise, you’ll need thoughtful schedules of when and who will perform testing, how the product will be deployed, and how you’ll handle customer service, billing, and product support.
If you work for a company that isn’t used to launching physical products, you might lack these basic disciplines and find that launching software is even harder than a company used to this world. In this case, going slow and thoughtful and communicating that your organization will require significant learning and growing pains will temper expectations and give you time to develop digital and product-related capabilities to build software.
Identify and mitigate structural conflicts
Software product development is mature enough to have good and bad ways of creating and releasing products. You can attempt to implement them in your organization, work with a partner to create an in-house software company, or hire outside expertise to fill some of the roles.
However, many organizations are set up in ways that are incompatible with successfully building and launching software. For example, if all of your technical resources are encouraged to bill hours to customer projects, you will struggle to find and retain resources for your internal software organization. Similarly, if you use your internal technical support department to support your software products, service levels and expectations internally, this will likely conflict with what is expected in the external market, creating a situation that could cost customers dearly and put your product at risk.
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Before writing your first line of code, consider who, where, and how your software products will be built and maintained. How will these people be managed and what will their metrics look like?
It might be more exciting to do that first proof-of-concept demo for the leadership team, but a few weeks spent figuring out how to properly set up your organization as a software vendor will pay off dramatically in the long run.
Identify supporting actors
While it’s obvious that you’ll need technical support for your software products, you’ll also likely need a variety of helpdesk support systems, from billing and technical support to new accounting and tracking approaches. revenues.
Besides the back office, you will also need a different approach to marketing and sales. Too many companies fall victim to the “Field of Dreams” approach to selling their software, assuming that, like the movie’s tagline, “if you build it, they will come.” Even if you successfully sell services or physical products to a well-understood set of customers, adding software to your portfolio does not guarantee immediate success.
Test your assumptions about how you’ll sell, support, and maintain your software products, and make sure you have at least an initial release of the support actors you’ll need before launch.
Software products are undoubtedly interesting and potentially lucrative businesses. An organization’s ability to add customers inexpensively while creating new, sustainable revenue streams should be on the table for every organization. However, like most interesting pursuits, adding software to your portfolio isn’t easy or a one-size-fits-all proposition. Embark on the journey thoughtfully and realize that success isn’t just about shipping off a great new app and hoping for the best.
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