Unlocking Growth Through Customer-Centricity

Technological advancements provide vehicles for innovation. Just in the past 25 years, we have seen wholly new industries and channels develop - the internet and ecommerce, the move to the cloud, the computing power and connectivity provided by mobile devices, and now Gen AI. Each of these technology innovations provided new opportunities to build great businesses, products, and customer experiences. Companies that understand these disruptions and opportunities can leverage early advantages, develop new categories, and lead the market. 

And yet, over 85% of new products and over 70% of digital transformation efforts fail.  

Not every company is able to capitalize on these advancements quickly enough. Organizations with traditional hierarchical structures and slower decision-making, often struggle to keep pace with the rapid evolution of technology and customer needs. A culture of innovation and bias-for-action that takes advantage of these technological vehicles, requires an evolution of the business-technology operating model. It requires a change in the way we think and operate.

Traditional operating models typically follow a functional or project-based structure, where teams are organized by specialization - product, marketing, engineering, operations -  or around specific projects. While these models have their merits, they often suffer from several drawbacks. Slow decision-making because of a top-down hierarchy, lack of empowerment and ownership for individuals, siloed thinking resulting in disjointed product and customer experiences, conflicting priorities and inefficient resource allocation, slow time to market and stifled innovation due to risk-averse cultures and processes that discourage experimentation. Companies that prioritize siloed departments, focusing on outputs over outcomes, teams and rigid processes find themselves lagging behind competitors who embrace a more agile and customer-centric approach. 

This is where the concept of a Product Operating Model comes in. 

As Craig Strong, Global Practice Leader - Product Operating Model and Innovation at AWS, and author of the Lean Product Lifecycle defines it, a Product is any entity that delivers repeatable value to (internal or external) customers. Each product team should look to build long-term, ongoing relationships with customers, seeking to really understand their customer needs. This could be customer-facing applications, internal tools, shared services, an API, or a process. A Product Operating Model orients a company to collectively optimize flow and value delivery for cross-functional product teams around products, focuses and aligns efforts to goals, and drives customer value, innovation, and continuous improvement. A Product-Driven Company then, is one that has the culture, capabilities, mechanisms, and organizational structures necessary to build and maintain a portfolio of products at scale that deliver customer value and revenue in a profitable way.  Examples of companies that have successfully implemented a Product Operating Model include Spotify, with its renowned "Squads" and "Tribes" structure, and Amazon, with its customer-obsessed "Two Pizza Teams."  But they don’t stop there, these organizations recognise the need to connect people and teams with common goals, break down functional silos, and put in mechanisms to have cohesive data to make the right decisions across different levels of the organization. These organizations have demonstrated the ability to rapidly innovate, deliver exceptional customer experiences, and maintain a competitive edge in their respective industries. 

The goal here isn’t to copy what these companies have done. Rather, it's about identifying the nuances and needs of your organization, and applying the concepts of Product Operating Models to create your own flavor that allows you to operate and innovate most effectively.    

Let’s break it down.

Transforming your organization to becoming product-driven involves evolving “how you think”, “how you organize”, “how you build”, and “how you govern”.

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How You Think: Shifting the Mindset

“Customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf”. - Jeff Bezos, 2016 Amazon letter to shareholders

Transforming to a product-centric approach begins with fostering a mindset that prioritizes customer value and continuous innovation. This involves fostering customer-centric thinking or “working backwards from the customer” at all levels of the organization. Note that “customers” here includes both external and internal customers (i.e. internal functions and your employees).  Place the customer at the heart of all decisions, and create personas and journey maps to guide product development. Redefine and prioritize success metrics that have a value creation focus. Include customer satisfaction, engagement, retention rates, feature adoption metrics, rather than project completion times. 

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How You Organize: Realignment to Product Oriented Teams

Organize cross-functional teams around products rather than functions. Each team should include members from diverse functions like development, design, marketing, sales, and others that are needed for fully delivering that product. Generally speaking, a product team can own one or more products, but a product should not be owned by more than one team. Of course, there will be exceptions to the rule, and there will be shared service teams that are horizontal in nature; but applying this concept will make resource allocation across those teams more efficient as well. Establish strong product management roles with clear ownership and accountability. Product managers act as the “CEOs” of their products, driving the vision, strategy, and execution; balancing commercial and customer success. They have the autonomy and accountability to make decisions. Empower teams to make decisions quickly and autonomously. Employ the concept of one-way door and two-way door decisions. A “two-way door decision” is one that’s easy to reverse, and a “one-way door decision” is one that’s impossible or very costly to reverse. Let product teams make quick two-way door decisions, and only escalate one-way door decisions to the appropriate heavier-weight decision making processes. This reduces bottlenecks and fosters a culture of ownership and accountability.

How You Build: Building and Delivering Products

Effective product development requires robust processes and tools that facilitate innovation, collaboration, and efficiency. Implement lean and agile methodologies like Scrum, Kanban, or even “agile-fall!” to ensure iterative development, continuous testing, and frequent releases. Adopt DevOps practices to streamline development and operations, ensuring faster and more reliable product delivery. Use continuous integration and continuous delivery (CI/CD) pipelines to automate testing and deployment. Create innovation hubs or labs where teams can experiment with new ideas, technologies, and approaches without the constraints of production policies and requirements. 

How You Govern: Governance and operating Models

A product operating model requires a governance framework that balances autonomy with accountability, and operations that support scalability and efficiency. Develop a portfolio management approach that uses both “bottoms up” and “top down” planning to oversee and optimize the entire suite of products. This helps in generating impact-driven ideas from the teams actually working on products, while allowing a rationalized prioritization of investments, risk, and returns across the portfolio of products.  Make data driven product decisions. Track key performance indicators like customer satisfaction, user engagement, and product performance to quickly flex roadmap priorities and resource allocation. Provide tooling that seeks to break down silos and democratizes access to data. Foster a culture of continuous improvement where teams regularly reflect on their processes and outcomes, identify areas for improvement, and implement changes. 

Craig Strong and his colleague Marcell Varbai have been researching operating models through their Pulse Check survey and AI analysis engine at AWS. Their ongoing study which has analyzed over 400K data points across 11 industries and 72 countries thus far, has revealed interesting insights and signals. It highlights that organization design is perhaps surprisingly the weakest influencer of the other four comparative themes. This challenges companies that seek to become innovative simply by emulating another company's organizational design. What they have also revealed is that culture, mechanisms, and governance have the strongest influence on each other to drive innovation. This infers that when implementing a product operating model, it is critical to look at how you manage, how you make decisions, and how you incentivize and recognize behaviors to improve innovation and customer-centricity

This is a journey

Driving an organizational transformation requires a clear vision, committed leadership, and a structured approach to change management. Define a clear vision of where you want to be, and work backwards from there - think big, start small. Use ongoing projects and initiatives to pilot changes. Involve your teams, measure the impact of changes, see what works and what doesn’t, and iterate from there. Embrace the journey with a commitment to continuous learning and improvement, and your organization will be well-equipped to thrive.

Is your company Product-Driven? Take this Product Operating Model survey to assess your Product Operating Model maturity, and chart your transformation journey.