How to Accelerate Time to Revenue for New Mobile Product Development
What if I told you there was a way to get to market four months sooner and with a $380K USD savings? Would you be interested? If you are thinking of staffing new product development or innovation programs by hiring an internal team, this article is for you. Here is how you can accelerate your time to market and manage your capital more effectively. I’ll start this off by laying out the costs of staffing a new team and then discuss some even better alternatives. The examples are from the U.S. but are adaptable to most regions.
Costs of Hiring
It takes time and expense to hire a new product team. On average, it currently takes 38.6 working days to hire an IT professional, or about 54 calendar days. Remember, that is the average, representing the time to hire about half of your team. Let’s assume you’re fortunate and have the whole team hired within 71 calendar days.
There is additional delay between offer acceptance and when your new employees will show up to work. If you put that delay at 2 weeks, then it takes about 85 days to get your new hires in the door when no move is involved. If you’ve been involved in hiring, you know that this can take much longer for even a small team. After all, the average calendar time to hire a QA engineer is about 155 calendar days!
Recruiting new employees also represents a cost. A conservative estimate of recruiting cost is $22,562 using in-house recruiting, and $31,970 if you use an agency. Let’s say you need to hire a six-member team for your project, and you do it with internal recruiters… you will have to spend over $150K before the project even starts.
The Productivity Ramp
There is also a delay between the day that employees arrive on the job and when they are fully productive. When you hire designers and engineers, or any other team members for that matter, there is a productivity ramp. For example, when things are simple regarding the new hire’s role, organization, and product there is at least a month lost in ramp-up cost and time. For more complex scenarios, the estimates can rise to a full year. To stay on the optimistic side of this, let’s assume that the ramp up for your team is only eight weeks.
The productivity ramp not only causes delay, it also represents expense. You are on the hook for the salaries of all team members as they ramp. For example, let’s say that your six-person team averages a salary of $125K/year that translates to a fully loaded cost of at least $250K/year. For an eight-week ramp-up period you are out about $230K in ramp-up costs. These estimates are conservative… they reflect a context in which there is an existing team that can help bootstrap the new employees in relatively simple business contexts. The numbers will be worse for creating new businesses, new product lines, and innovation programs.
The Fractional Resource Challenge
If you hire for a new development program that is substantially different from your business-as-usual, you will be challenged to effectively use your whole team. Some team members will be slammed while others will only be needed for a fraction of their time.
Figure 1 lists 8 different skill-sets you will need to hire for a mobile solution. You will need even more skill sets if you still need to complete your market and consumer research and crystallize your business and product strategy.
Let’s say your plans pencil out to 4 developers for the project. You also need a designer. Companies have recently been increasing the number of designers per engineer. If you take the ratio of 1 designer per 8 engineers, then you will only be able to effectively use your designer on a half-time basis. The same is true for other roles.
There is inherent inefficiency in creating small new teams to staff new product development. This is why you see job postings that ask for skill sets that don’t exist… at least at the price that most companies are willing to pay. You’ve seen the posts, someone who is great coding the front end of the product, server-side development, is competent at visual design, design research, user experience, and can do software QA. Of course, a design portfolio and code samples are both required. It would be great hedge against the fractional resource challenge if you could find these people in a timely way. Unfortunately, you won’t.
The Net Costs of Building a New Team
The impact of building an internal team is non-trivial to new product development, especially where time to market and efficient use of capital are prized. Building a new team in our simple example will set back your launch by at least 4 months, and you will be out more than $380K. You will have accomplished nothing other than hiring and ramping your new employees with that investment. What is more, the team’s efficiency will suffer because of the fractional resource challenge. These are conservative numbers for a small team. In following this path, you will have blown some or all the budget and time required to get a first release of a product completed. You will also be anywhere from 50%-100% behind the schedule you could have achieved with outside resources.
A Better Way
That may all seem very heavy and discouraging, but you don’t have to settle for this. There are better ways to get a quality product into market quickly and at a reasonable cost than staffing from scratch. How you do it depends on two considerations.
- Are you committed in the long-run to the new product area you are pursuing, or does the business model and operating model still need to be validated in market?
- Are you committed to developing an internal core competency in this area of technology because you believe that this will provide a competitive advantage, and are you concerned about being dependent on external resources?
Let’s take on the first consideration. If you are not yet committed to the business area, product line, or innovation that you are pursuing you will save money, time, and organization stress by bringing on an external company to do your development.
When I took on an innovation team that was incubating new product areas, I asked my lead technical architect for his thoughts on how to staff development. He pleaded with me not to hire a development team but instead to rely on a top-end development company. His reasoning was that we would never attract (or keep) the same caliber of developer, that we could never keep them current in mobile and IoT technology, and that the last two times he had been down this path he had ultimately had to staff then lay off the development teams as the organization moved to different focus areas. Fortunately, I took his advice. You might justifiably protest that we would have needed the team had we stuck with the program we were bringing to market. It is a fair point but hold that thought so we can address how to do it while taking out time, cost and risk.
Now we’re ready to take on the second consideration. Let’s say you are certain that your organization is committed to the strategy and technology that you are working on and therefor you believe you must staff to have the capability you need in the long run. Your take is that the right team will give you the sustainable competitive advantage you need, and that you are committed to investing in them to keep them current. Are you stuck taking on the costs and delays associated with recruiting, ramping and dealing with uneven task loads? No, there is a much better way to make this happen.
Start by bringing on an on-shore or near-shore top development company so that you can get started immediately. Next, work out an agreement where your development partner brings on talent with the purpose of ultimately building out your team. You must do this in advance since many software-houses contractually prohibit you from poaching their talent. This way you know you have people who are a fit for the organization, understand the product and technology, and can deliver. You will avoid delays getting your product to market, minimize ramp costs, and you have no fractional resource challenge in the short term. In the long term you have a partner to provide part-time resources when they are needed.
Getting started in new business and technology area can be difficult, but you can remove much of the risk, delay and expense by finding the right partner for your initial releases. If you choose wisely, this partner can also help you with your ultimate staffing needs. Don’t get caught up in the assumption that you need to develop applications internally. Some of the most successful projects (e.g. Google, Groove, Slack) have started with external development teams for speed, efficiency, and expertise.
Blue Rocket is a digital product development company based in San Francisco. Through strategy, design, and engineering, we help great companies build powerful digital experiences — the right way. Find us at www.bluerocket.us.