Applying the principle in practice

While making the shift to product teams is a radical move for many organizations, the good news is that it can be implemented incrementally to manage risk and create space for leaders and teams to learn what works best in their unique context.

To ease the transition, we’ve summarized each of the key elements that will set the right environment for the change.

The first step is to ensure there is sufficient clarity of purpose and context for the shift. In terms of creating clarity of purpose, position the shift to product teams as a better way to bridge the strategy/delivery gap. By shifting to long-standing, stable and autonomous product teams, the organization will be able to ensure better alignment between the executive vision and business strategy, and the operations and delivery functions.

The next step is to rethink the organizational structure in ways that reduce hierarchy, silos and top-down decision making, and replace them with structures that maximize information flow, autonomous decision making and fast feedback loops.

One of the most effective ways to do this at the organizational level is by merging the IT and Product functions. This enables the technology and product domains to join forces to meet common goals (i.e. using technology and product to create competitive advantage and improve customer outcomes). Not only will this create alignment and focus on customers and shared outcomes, it will effectively reduce hierarchy, silos and bureaucracy.

Note: We want to again reiterate that in this context, “customer” could mean external or internal users of a product that provides value.

Once the groups are merged, our suggestion is to consider deploying 90% of the newly formed organization on three key strategic fronts:

The remaining 10% should be left unused, to ensure there is enough slack in the system to handle emergent needs and avoid the pitfalls that come with over-utilization, which counter-intuitively tends to decrease efficiency rather than increase it.

The next step is to evolve the funding model, by funding value streams owned by autonomous product teams rather than short-lived project teams. In practice, this approach is similar to how venture capital firms work, in which product teams are incrementally funded based on results while business owners retain the option to “purchase” additional rounds of funding based on the current net present value of the work.

This approach is known as value-based prioritization, which accepts the reality that conditions and priorities change frequently based on customer insights and changing market realities. It allows business owners to divest from initiatives that are no longer as valuable as they may have been thought to be, which in turn frees capital for investments in potentially more lucrative initiatives.

Finally, the last element needed to make the shift to product teams is role evolution. Product teams are intended to be autonomous in their decision making process and largely self-sufficient in terms of capabilities. As a result, when organizations make the shift to product teams, they often find they no longer need traditional management roles. Instead, what they often need are experienced facilitators to help product teams stay focused on creating value for customers in a sustainable way.

Oftentimes, this shift provides a natural evolution path for experienced managers who can leverage their experience and expertise in an entirely new way. Instead of “owning” the decisions made by product teams, managers are effectively enabled to use their experience to help product teams make good choices.

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