The winning ways of product leaders.

• Author: Treacy, Michael
• Position: Product development

Champions of product development have mastered the three principles of people management, business structure, and development procedures.

Volumes have been written on how to turn an apparently hapless product development process into a streamlined, replicable, well-structured set of activities. The advice generally suggests that if you take the messiness out of the system and eliminate the dysfunctions, you'll get something that should work if you can only ensure that everyone follows the streamlined methodology and adheres strictly to the prescribed steps.

That's what the coaches say. The players know it doesn't work that way - generic operating procedures and structured processes don't produce winning products unless they are designed to play into the drivers of individual behavior. Two of those drivers are a thirst for problem-solving and a distaste for bureaucracy.

Does that mean that structure and process play little or no role in product development? Hardly. Product leaders create flexible organizational structures and robust processes. They allow resources to move toward the most promising opportunities during development and during the resulting product's market life cycle. They are continually shifting resources to the project or market where the action is. "Make hay while the sun shines" is the prevailing attitude in these companies.

Robust processes are those that enable people to flex their muscles and minds without creating disruption. They provide efficient coordination, while accommodating inventiveness and discipline. The product leaders we observed applied several principles to accomplish this fusion.

Principle One: Keep people on track by organizing the work in a series of well-paced challenges, each with a clearly defined outcome and a tight deadline. Intermediate milestones, and the chance they create to celebrate interim victories, generate the excitement talented people thrive on.

Principle Two: Create business structures that don't oppress. Large companies replicate small ones' entrepreneurial spirit by breaking people up into teams or clusters. Or they locate their research labs in the woods, away from the companies' potentially stifling headquarters. Thermo Electron, the Waltham, Mass.-based $1.2 billion high-tech company, has spun off eight divisions into autonomous, publicly owned companies. They sell everything from perfume patches to pollution-measuring instrumentation and mammography equipment. Although Thermo controls a majority of all of the companies' shares, their CEOs act as entrepreneurs, not divisional caretakers. From 7% to 12% of shares in each new company are reserved as options for that company's management. Thermo's central management is unable to impose any plan on any company in the Thermo family. The company expects to spin off about 10 more companies in the next decade.

Principle Three: Stress procedure where it pays the biggest dividend. Almost invariably that means emphasizing procedure during the final leg of the product-development effort. Looming drop-dead dates and commitments tense the work. The velocity and frenzy of activity accelerate. Teams burn money...