What is a product organization? It is combination of strong autonomous teams of around 10 people, split by product or service perimeter, driven by client satisfaction, applying Agile and lean management principles, such as transparency, empowerment, collaboration, iterative delivery and experimentation.
According to an article from Gartner, “85% of participating respondents state that their organization has adopted, or plans to adopt, a product-centric model.” This is not surprising considering the key benefits of becoming a product-centric organization, like:
- Increasing client satisfaction by putting the customer at the heart of the decision process
- Accelerating time-to-market, from new ideas, to release, to the end customer
- Improving the ability to embrace changes and create new business models
- Developing team autonomy and empowerment, increasing the happiness factor
In this blog, I offer four critical success factors for implementing a product organization that delivers the desired business outcomes.
CREATE CUSTOMER CENTRIC PRODUCT VERTICALS
To design the verticals of a product organization, you need to identify the main products and services that generate value to the organization. For each of them, analyze the activity flow that delivers value to the end-client and identify the business and IT capabilities required to deliver it. Each vertical is then a grouping of these capabilities.
To ensure efficiency and sustainability of the model, four principles should be applied:
- Customer-centricity: each vertical serves a well-defined client need and integrates a business promise delivering value for the customers.
- Long-term vision: the value promise of each vertical is translated into a multi-year business & IT roadmap, which results from the collaborative work of all stakeholders of the vertical.
- Consistency: each vertical is responsible for a set of business and IT capabilities whose common purpose is to serve the value promise of the vertical.
- Capacity funding: A budget is allocated for each product managed in capacity mode, in order to steer innovation, development of new services and their day-to-day run.
SUPPORT PRODUCT VERTICALS WITH HORIZONTAL FUNCTIONS
While product organizations are thirsting for highly autonomous customer-centric verticals, there are some general elements applicable across all verticals:
- Generic business operations, such as selling points or stores, support desk
- Support and control functions, such as HR, Finance, Legal, Security, Compliance should remain horizontal and become more agile, transparent, and data-driven
- IT for IT functions and shared IT assets, such as the Helpdesk, IT infrastructure, knowledge management etc. should also be standardized across product verticals to ensure technological consistency across the organization and become more efficient
- Centers of Excellence (CoE) that allow rare competencies to be shared across verticals
- A Business and IT Governance function is mandatory to manage priority and arbitrate investments between verticals. It includes the management of a lean portfolio of projects and opportunities, supported by an advanced Agile cockpit, gathering and analyzing metrics about business value, service quality, delivery speed and predictability.
The capability of a company to effectively embrace a flexible organization and collaboration among its vertical and horizontal is a key marker of agility and optimization.
MAKE VERTICALS AUTONOMOUS TO CREATE, BUILD AND RUN PRODUCT
The end-to-end responsibility of product verticals is a key lever for value creation. Because they know the customer needs best and have the right competencies to serve them, each vertical should manage the whole lifecycle of its product.
Consequently, because the delivery speed will evolve along the product lifecycle, the verticals must manage several delivery speeds and delivery models:
- Product innovation methods (Lean start-up, design thinking)
- Product development methods (Scrum, DevOps, Infrastructure as code) supported by cutting edge technological capabilities (DevOps Pipeline, Cloud platform) enabling new features to be delivered almost every day or every week
- Product stabilization methods (V Cycle, Kanban) and a possible outsourcing solution enabling costs to be optimized, while ensuring a monthly or quarterly product release.
ADOPT A PROGRESSIVE & ITERATIVE TRANSFORMATION APPROACH
The best way to approach transformation is to do it progressively and iteratively with a test and learn approach, along with a strong focus on adding value to the outcome.
Design & Experiment: start with a pilot and get buy-in
- Define a pilot with a clear value proposition, client facing challenges and a small perimeter of 10 to 50 FTE
- Make sure that stakeholders are aligned on the business case and define transformation KPIs
- Explore activities and processes around value chains by using customer perspective
Focus & Accelerate: implement the full model on a limited perimeter (100 to 500 FTE)
- Create verticals based on value chains around both verticals and transverse horizontals
- Build a roadmap to shift capabilities to the target product verticals and install the new governance model
- Start organizing teams in a “you build it, you run it” paradigm
- Reduce mid-level management and optimize team sizes. Empower the teams by introducing a “fail fast” environment
Scale & Improve: deploy across the entire company and ensure continuous improvement
- Generalize the product delivery model to all activities, including some IT-only activities
- Focus on product-based outcomes: make the budget allocation dynamic with the possibility for adjustment of capacities
- Embed innovation processes and integration of new technologies within each product
ACHIEVING SIMULTANEOUS TRANSFORMATION
In conclusion, companies putting customer at the heart of their activity have no choice but to set up a product organization. Successful transformation goes well beyond organizational change to embrace both technology and operational change simultaneously – as a component of Inventive IT.
To learn more about managing disruptive change with Agile, read our new Point of View paper Simultaneous Transformation.
This article is co-authored by Sylvain Roux.