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Product Development versus Project Development

Agile has been most widely used in “product” development environments and less widely used in “project” development environments.  The difference between product development versus project development is not widely-recognized.  Of course, this is not a totally universal, black-and-white distinction; but, in general, there are some key differences.

Product Development versus Project Development

Product Development versus Project Development

General Characteristics

AreaProduct DevelopmentProject Development
  • Products typically have broadly-defined objectives
  • Products are less deterministic and the business model is usually a little more open-ended
  • Projects generally have more clearly-defined expectations and requirements
  • Projects are typically more deterministic and the business model is more closed-ended
UncertaintyProducts are generally somewhat speculative and might require a significant amount of innovation particularly if it is something that has never been done beforeProjects are generally less speculative
DurationFor many products, it’s an effort that simply goes on-and-on without end to provide ongoing support and enhancements for the life of the productProjects typically have a well-defined beginning and end and are completed as soon as the project objectives have been accomplished
ExamplesFor example, a company might say that:
  • We want to develop a product to satisfy “X” market need (where that market need may only be generally defined and might need to be validated) and
  • We’re going to invest $X to fund a team for ongoing development to support that product development initiative
For example, a company might say that:
  • We want to implement a project to install and implement a new CRM system with the following requirements
  • The project needs to be completed in six months and is expected to cost $X

Budgeting, Business Model, and Decision Process

AreaProduct DevelopmentProject Development
BudgetingThe budget for a product development effort may have some slack in it depending on the level of uncertainty associated with the product development effortVery few development teams are given a “blank check” to do some kind of project without having some expectations of what the project will accomplish, what it’s going to cost, and what the schedule will be
Business ModelThe business model behind a product development effort is typically based on a projected return on investment (ROI) that the decision to invest $X in the ongoing development effort will provide an acceptable return from the profitability that the product will generate over the life of the productThe business model behind projects is typically very different. A company typically has a given amount of funding to invest in projects and some kind of project portfolio management approach is generally needed to determine the appropriate mix of projects that will provide the greatest overall benefit
Decision ProcessThe decision process associated with a product development effort is generally focused on prioritizing what features should be added to the product to provide the highest level of customer satisfaction and profitability
  • In order to make the decision of what projects to fund, something may need to be known about the expected results, costs, and schedules of the projects in that portfolio
  • There is also an ongoing need to monitor the performance of those projects to see if they really are going in the right direction to provide the return that was expected

Overall Summary

There is a big difference between the business model and decision process in a product versus project development environment. 

Agile is very well-suited for a product development environment. Applying Agile principles and practices in a “project” development environment can be a bit more challenging but it definitely can be done. 

  1. Agile works best where there are limited constraints on costs and schedules and the primary goal is to add features to maximize market acceptance and customer satisfaction
  2. When you introduce constraints on costs and schedules in a project development model, a hybrid agile approach may be necessary to meet the competing demands of:
    • A highly flexible and adaptive development approach, and
    • The predictability of meeting cost and schedule constraints that is often demanded in a project environment.

The Hybrid Agile Development Approach is an example of how this can be done.  It involves wrapping a “shell” around an Agile development process. That “shell” can be as thick or thin as you want it to be. The approach can balance the need for planning and predictability with some level of flexibility and adaptivity.

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Check out the following related articles on “Agile Project Management”:

Additional Resources

Resources for Agile Project Management Online Training.

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