We are in the age of products that touch the not-so-technically-savvy end users. The trend applies to products for the consumers (B2C) as well as enterprise users (B2B). Software is a major part of these emerging products.

The trend started with the Apps on iPhone. It has since spread to the enterprise applications due to the expansion of user personas beyond the technically savvy IT or business operations teams. Think of the ease of use of successful products such as Instagram, Facebook, Uber, Box/Dropbox, SalesForce, Workday as well as the emerging portfolio of products from Apple, Google and Amazon.

The Dawn of the Age of Products

This shift towards products picked up pace around 2010. This is also reflected in the VC investments and corporate budget allocations. The services-led business model (pioneered and capitalized by IBM), which was dominant since the late 1990s, no longer provides the competitive advantage that it once provided. The same is true of hardware architectures that once provided competitive advantage to Sun Microsystems and Cisco.

This shift to products can be attributed primarily to the maturation of cloud & mobile technologies as well as the emergence of platform economy. They have made it easy to build products by eliminating several of the critical success factors of the past. You no longer have to worry about the servers, middleware and other foundational elements of product development. Access to users and GTM activities have also become easier. An early stage startup now typically includes a hustler product manager and a rock-star engineer specific to the domain (say J2EE or .NET or Android). The more successful startups bring in a good UX designer sooner than later.

The Winners and The Losers

As with any shift in technology landscape there are new winners and new losers. The performance in the stock market is a reflection of it. The recognition and response to this shift is also reflected in the choice of CEOs. Companies such as Google, Facebook and Amazon who have pioneered this trend have continued to pick CEOs and groom leaders from a product background. Microsoft’s turnaround can be attributed primarily to the choice of a CEO, Satya Nadella, with a product background. In my opinion IBM failed to recognize and respond to this trend and picked the wrong CEO. In the process IBM has lost a decade or more.

There are a lot of companies endangered by their inability to build products organically. The Board of Directors need to take a hard look at the leadership and succession planning in this age of products. While M&A might serve as a temporary fix, the leverage and longer term value that an acquisition can provide are at risk unless companies adapt their culture to this age of products.

The 3 Imperatives for Success in the age of products

The response to this age of product has to start at the top. Hence the choice of the CEO is an important factor. There can be no better validation of its importance than the turnaround at Microsoft since Satya Nadella took over as the CEO.

Here are the 3 key imperatives to succeed in this age of products.

1. The Practice of Product Management

The practice of product management is improperly adopted at many companies. At one end of the spectrum, product managers are program managers in disguise. At the other end of the spectrum, some product managers are in effect project managers of an engineering team.

Refining the product management practice should be a priority. A good product manager is a multi-talented professional – a strategic thinker, is obsessed about understanding customers/market and is technology savvy.

2. A Culture of UX Design

The attention User Experience (UX) design is receiving is long overdue. In essence, UX design is all about understanding the user of the product being built. Some companies have adopted UX design practices in the past without calling it UX design. Products from Microsoft, Apple and Adobe have had good UX design for a long time.

UX design is an integral part of approaches such as Design Thinking and Lean Startup. There is a lot of noise in the space of UX design. Hence adopting the right UX culture for your organization’s mission is going to be the critical success factor in this age of products.

3. Organic Innovation

A culture of organic innovation is vital to survive in this age of products. Continuous innovation in the areas of adjacencies provides competitive advantages and differentiation. Organic innovation also validates support for UX Design and Product Management practices. An internal incubation division is a must for all companies with over $1 B in revenue. A good practice of organic innovation has a multiplier effect on the M&A practice.

However, Organic innovation is not easy either. Organic innovation programs need to be fenced from the P&L of an existing business unit. Hiring entrepreneurial minded leadership team is the key to success. Organic innovation projects should start with a small team with incremental investment based on reaching reasonable milestones.