What makes a company or product succeed or fail? For many in Silicon Valley, they attribute the success or failure of a product largely to timing. This is understandable since so many products failed in their early versions only to be reanimated in the future to massive success. Being early and being wrong are the same thing.

The other explanation for not succeeding is talent. Not having the right people. The idea being a product can only rise to the level of the team building it. While this is a factor it would not explain why teams stacked with talent fail to ship a succesful product.

A company's (or team's) capabilities are far more influential on whether it succeeds or fails than timing or team expertise. But what comprises a company's capabilities?

This answer is is laid out in Clayton Christensen in "The Innovator's Solution". This chapter is less cited than other parts of his work but it has been one of the most influential frameworks in my career.

A company's capabilities are defined by its resources, process and values.

Resources

The first element are a company's resources Christensen defines resources broadly. I will quote it directly:

"Resources include people, equipment, technology, product designs, brands, information, cash, and relationships with suppliers, distributors, and customers. Resources are usually people or things - they can be hired and fired, bought and sold, depreciated or built. Most resources are visible and often are measurable, so managers can readily assess their value. They tend to be quite flexible as well: It is relatively easy to transport them across the boundaries of organizations. An engineer who is a valuable contributor in a large company can quickly become a valuable contributor in a start-up. Technology that was developed for telecommunications can be valuable in health care. Cash is a very flexible resource."

Christensen, Clayton M.,Raynor, Michael E.. The Innovator's Solution: Creating and Sustaining Successful Growth. Harvard Business Review Press.

In software companies, resources are often synonymous with people. Managers tend to have a lot of autonomy in hiring making it a lever they can control. A core expectation of a manager, and therefore their success, is tied to their ability to hire and retain a strong team. Since the incentive systems in company's reward hiring, growing and retaining people. managers will spend disproportionate time and energy here. This leads to a blind spot where managers will over emphasize the importance of people as the sole resource to be managed

Money (budgets) is the second most utilized resource inside companies. While managers get some amount of discretion, there are usually a series of checks and balances to prevent misallocation of budgets. Larger uses of cash as a resource (e.g. build a data center, acquire a company) are more complex and require co-ordination and alignment both vertically and horizontally in a company.

Process

Processes are how people turn inputs (raw materials, ideas, user research, sketches, budgets) into value (products or services). There are two kinds of processes, formal and informal.

Formal processes are visible, defined and enforced. They can be taught to people and straying from them has some consequence.

Some companies have defined Product Design Processes bur most don't. They may have parts that are formal. For example, legal reviews that need to be followed before launching.

In Silicon Valley there is an aversion to formal processes when it comes to software development. This aversion comes from an opposition to the bloated development processes of the 1980s and 1990s. The Agile software movement of the 2000s was created as a revolutionary reaction (their founding document was referred to as a "manifesto") to these previous processes. The rise of continuous delivery software meant that speed and agility were more important than highly predicative processes. While companies and people ran away from formal processes, the need for process didn't go away. Instead, companies just created a lot of informal processes.

Informal processes are accepted ways of working that don't have strictly enforced methods. Teams are left to define "how" they want to work and form their own cadence, artifacts and rituals. This feels faster and more nimble than adhering to some company wide process that lacks situational nuance.

The problem with informal processes is that they aren't documented and require people spend a lot of time to learn them. Similar to the "unwritten rules of baseball" these informal processes are coded inside cultures. People learn them through operating at the company. Rarely does anyone remember where they came from or why they were initially created.

When teams are struggling it is helpful to look at what processes are being utilized. It is usually some combination of formal and informal processes. A common disfunction is when different parts of the team are employing different processes simultaneously. For example, Engineering may be using one process for code deployment. Design is using another and PM may be using a third. If product marketing, legal, infra and other teams are involved there can be even more noise.

If each part of the team is working inside its own process you get a series of sine waves each peaking and valleying at their own pace creating massive dissonance. This is where the conditions of modularity come into play. If teams can not operate in a modular fashion then agreements on how to row together need to be implemented.

Values

People think of values as statements written in decks. Often confused with a mission, values are a distinct element in companies and teams. Values are the standards by which employee's make prioritization decisions. Said another way, values are what employees use to make decisions in the absence of direct orders or policy from leadership.

This part is very important. Over time an organization's values will optimize around a company's cost structures and gross profit margins.

Employees and managers will be incentivized to prioritize efforts that make the company money. As a result, they will deprioritize efforts that are perceived as low margin or serve small markets compared to the incumbent business of the company.

For example, a luxury goods company will value products that match their gross margin and market profile. They will hire people that can design clothes or goods that help them achieve this. They will form processes that enable the delivery of a $10,000 handbag to market. They will form supplier relationships. retail strategies, marketing campaigns to make sure that bag can command that price.

This is why it is very difficult for Patek Phillipe to make a cheap watch or for Walmart to release a couture line of clothing.

When trying to get something prioritized it is important to understand the force that values have. Designers will often pitch ideas that run counter to the values of the company. They will propose ideas that are very interesting and cool but lack the gross margins or market size to make it valuable enough for the company to prioritize.

In my experience the RPV framework is one of the most helpful when trying to understand the workings of a company and team. I use it to debug dysfunction on the team. I also use it to figure out how to implement more systemic change in a company.