The project based funding model has been around for a long time and is an important part of the project management discipline. But while the project based funding model certainly has its uses, the dedicated product team model has a number of advantages in the area of product development. One of the main benefits is that it maintains team continuity, which is extremely important to turn knowledge and experience into successful product.
In a post on the Silicon Valley Product Group blog, Marty Cagan argues against the project based funding model for product development and explains the advantages of the dedicated product team model.
There are three fatal problems with the project-based funding model:
- You very likely have no real clue when you propose a project for funding if you should really even be pursuing the project. Even though you might pretend otherwise with a cleverly crafted “business case” the truth is that you probably have no real evidence if your customers are going to like this, and you probably also have no real idea how much it will cost to build (because at the project proposal stage, you don’t even know what “it” is). So you don’t know the revenue and you don’t know the required investment, so of course the ROI estimate is less than meaningful.
- Creating strong products is not a series of projects that come in sporadic bursts of a few months each over several years. Strong products result from getting your concept in front of customers and rapidly and continuously learning and improving. Further, to make this progress, you need not just continuity of investment, but also continuity of the team.
- Very often in good product work we find that our initial ideas are not quite right but if we change direction somewhat, which we call a “pivot,” we can often uncover major new sources of revenue. These are the very sources of revenue that companies depend on for another several years of rapid growth. However, with project-based funding, the consequence is that this sort of pivot is effectively discouraged.
You can find the article on the Silicon Valley Product Group blog here: Project-based Funding
Incidentally, Marty has also written a great book about developing great products that I highly recommend. The book is titled Inspired: How To Create Products Customers Love.