The Dual Paths of Product Development: Understanding Internal and External Dynamics

Judith Kwentoh | December 26, 2023

Developing a product for use within an organisation (internal product) versus a product for the organisation's customers (external product) involves different considerations and approaches.

Here are the key differences:

Purpose and Objectives:

Internal Product aims to improve the organisation's efficiency, productivity, or internal processes. The focus is often on solving specific operational challenges or enhancing internal workflows.
External Product aims to meet the needs or solve problems of external customers. The focus is on market demand, customer satisfaction, and revenue generation.

Development and Feedback Cycles:

Internal Product typically has a narrower scope, tailored to specific internal needs. Thereby, scalability is limited to the organisation's size and structure.
External Product requires scalability to cater to a potentially large and diverse customer base. The product must be robust enough to handle varied user loads and scenarios.

Revenue and Budgeting:

Internal Product is not directly tied to revenue generation but to cost savings or efficiency improvements. Budgeting is often an internal allocation.
External Products directly linked to revenue generation. Budgeting includes marketing, sales, and customer support costs.

Marketing and Distribution:

Internal Product requires minimal marketing and a distribution plan, seeing the product is for the organisational use.
External Product requires a comprehensive marketing strategy and distribution plan to reach potential customers.

Understanding these differences is crucial for effectively managing product development, ensuring that the product meets its intended purpose and user needs, whether for internal use or external customers.

Ignoring the differences between developing internal and external products can lead to significant risks. Misalignment with user needs may result in products that fail to address specific problems, leading to poor adoption and satisfaction. Inefficient resource allocation can cause overspending or under-resourcing.

For external products, ineffective marketing and distribution strategies can limit reach and impact. Compliance and security oversights, especially regarding customer data, can expose the organisation to legal risks.

Development misunderstandings can lead to delays and increased costs. Internally, resistance to poorly aligned products can result in low morale and decreased productivity.

Overall, these missteps can reduce competitive edge and impact organisational success.

In conclusion, whether developing a product for internal use or external customers, recognising and adapting to the unique requirements of each is vital.

These differences shape how we approach product development, from the initial purpose and user base to the development process and market strategy.

As professionals navigating the complex landscape of product management, appreciating these distinctions enables us to create more effective, targeted solutions that genuinely meet the needs of their intended users.

I hope this insight is valuable in your product development endeavours.

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