The evolution from project- to product-centric business models is accelerating fast as companies seek new ways to generate long-term customer value. Innovative CIOs have begun replacing traditional IT project structures with product-centric models, ultimately re-defining their organizations’ vision, purpose and definition of success. Early adopters have realized benefits like reduced costs, increased flexibility, improved service, a better customer/user experience, and incremental business value.
Yet the “project-to-product” transition isn’t easy. Embracing a product-centric model often involves aligning complex change across a range of functional areas. Our work with market leaders has uncovered six key learnings that can help organizations move toward product-centric ways of thinking, organizing, and working.
Learning One: Change the Way Value and Performance are Measured
Successful product-centric organizations measure value and performance very differently. Project-centric operations usually measure narrow technology- and enterprise-centric Key Performance Indicators (KPIs) such as operating cost, service performance and project delivery. Product-centric organizations focus on measuring business outcomes and customer-centric KPIs such as top-line growth, operational efficiency, customer loyalty, and market penetration. They also strive to measure and evaluate the holistic performance of individual products at different stages in their lifecycle, replacing performance frameworks based on function, team, platform or project.
Supplementing “traditional” KPIs with a product-centric performance measurement and evaluation framework has the most impact when it has reoriented and galvanized the IT organization around a new mission: creating sustainable, long-term business value by working across silos to innovate, deliver and operate a portfolio of market-leading digital products.
Learning Two: Culture and Mindset are as Important as Organizational Design and Process
Many organizations begin their product-centric transformation by designing a target operating model. While it’s vital to get the operating model right, it’s equally important to define the change in behaviors, norms, values and mindset required to underpin a product-centric ethos. Product-centricity is about more than adopting new ways of planning, organizing and delivering. There are more intangible cultural dimensions to the “project-to-product” transition that play an important role.
Culturally, product-centric organizations go beyond customer centricity to forge a shared belief that “we exist for our customer.” A product-centric mindset is passionate about a shared mission, prioritizes value creation over process, advocates creative collaboration, is continuously curious, embraces experimentation, and strives to empower others.
Creating the right culture and mindset can be challenging. Leaders have generally achieved cultural change while deploying their target operating model through purposeful leadership, coaching, and changes in recruitment and incentivization frameworks.
Learning Three: A Design-led Approach Maximizes Business Value by Optimizing Customer and User Experience
Great digital products come from great design. Many organizations realize this too late, wasting time and effort developing products that don’t deliver the right experience. The most-effective product-centric models encourage design thinking in their product teams and empower them with the tools to create customer and user experiences that truly differentiate their product.
Managing and orchestrating design activity and decisions can be a delicate balance. “Over designing” can be costly in terms of resources and time to market. The product team has to be confident that the investment in design will create sufficient incremental value. Design imperatives need to be balanced with architectural, technical, commercial, and operational considerations. To make the design-led approach work, product teams must adopt a collaborative and transparent approach to resolving these trade-offs with a laser focus on maximizing value.
Learning Four: Product Management is the Bedrock to Build on, but it can be Difficult to Achieve
Embedding an effective product management capability is critical. Product management is the structural and strategic enabler that underpins, coordinates, and facilitates development and operations within a product-centric model. Great product managers connect, innovate, inspire, and disrupt, keeping everyone focused on what matters: creating amazing products that delight customers and deliver incremental value. In so doing, they drive and embed new ways of thinking and working across the business, acting as catalysts for change, innovation and growth.
However, getting product management right can be difficult. Great product managers have the right blend of hard and soft skills, the right mix of EQ and IQ, are a good fit for the organization, and are passionate about their product and their (virtual) team. It isn’t just about recruiting the right people. Product managers need to be empowered and incentivized to make difficult decisions, take risks, fail fast, and work across silos to “make it happen.” This requires bold decision-making and careful change management to embed the right operating environment, organizational design, budget structure, program design, and lines of accountability and authority.
Learning Five: Product Owners Reduce Development Cost, Time to Market, and Risk
The distinction between product management and product ownership is important. Product managers have a strategic focus, striving to optimize the long-term performance of the product portfolio and individual products throughout their lifecycle. Product owners have a more tactical focus, translating the product manager’s vision and roadmap into granular requirements and keeping everything on track.
Some organizations blur the line between product management and product ownership. While there are examples where this works, organizations generally realize more value creating distinct Product Owner roles. Embedding product owners within agile development teams has been a “game-changer” for many. Great product owners:
- Maximize value by ensuring development aligns with the product strategy and roadmap
- Reduce cost and lead times by driving pace and momentum, by clarifying priorities, defining next steps, making decisions and addressing blockers
- Create products that delight customers by constantly insisting on and enabling customer-centricity across the development cycle
- Engage and inspire the team by connecting them to the customer and creating a sense of mission and purpose
- Identify, manage and mitigate risk through their passion and commitment to deliver their product, never settling for mediocrity
- Enable the development team to pivot rapidly, creating flexibility and agility by galvanizing and guiding
Learning Six: Without Effective Portfolio Management, there is a Risk of Diminishing Returns as Organizations Progress Along the Maturity Curve
Empowered high-performing product managers and product owners will create great digital products and deliver a step change in the business value created by the IT organization. When organizations reach this level of maturity, they often need to change how they plan and govern their product functions to balance cost and quality. As product managers and owners relentlessly advocate for their products, a key question arises: how does the organization ensure they’re investing in the right products when faced with well-articulated but competing cases for investment?
Balancing competing cases for investment requires robust portfolio management to maximize return. This is achieved through rigorous and ongoing prioritization, ensuring resources are allocated to products that create the greatest relative value for the enterprise. Many organizations find portfolio management to be challenging and struggle to balance hierarchy with a collaborative, risk-seeking, innovative culture. Nevertheless, once organizations reach a certain point in their product-centric journey, effective portfolio management is a must-have to avoid diminishing returns.
Conclusion: Every Journey is Different, but Everyone can Succeed
Every “project-to-product” journey is unique, and there is not a one-size-fits-all approach. Some companies have embarked on a rapid and wholesale business transformation, while others have innovated incrementally. Some chose to focus on culture and people first, while others prioritized their operating model and process. Yet each one embraced the opportunities presented by transitioning to a product-centric model, and they share one more common denominator: they firmly believe their business is more agile and responsive, their customers are happier, and their people are more engaged because they began the journey.