Transforming towards Product

- why product teams need to be innovation teams

The truth is, innovation is merely a single strike of genius, but a model you follow to enable teams to become serial innovators. That’s how you win the market. That’s how you help your company transforming towards product.

In the August 2020 congress hearing on antitrust politics, the CEOs of Google, Amazon, Facebook and Apple, also known as the ‘Big Four’, had to answer questions on concentrating economic power aka building monopolies. Congress members wanted to better understand how the future plans of the leading tech companies reinforce or balance their almost monopoly positions, as monopolies are considered bad for economic and political stability.

In their opening statements, the leaders of the ‘Big Four’, shed light on what drives their lasting success. They all expressed their strong belief that a constant stream of innovations is what makes them more successful than the rest. The common understanding was “if we don’t keep innovating, someone will replace [us]”. (A summary of the hearing by Ben Thompson including the opening statements can be accessed here: https://stratechery.com/2020/antitrust-politics/)

When innovation is key to long-term success, let’s look at how leading tech companies produce such innovations. Luckily, the companies themselves publish lots of material to make sure others can learn from it. We also see many people that have worked in such environments to take their knowledge to different companies throughout the globe, speak about it at conferences, write blog posts and run podcasts. The way those companies work is therefore well documented and should not surprise anyone who works in the tech space. At the same time, the vast majority of companies are struggling with transforming their organisation successfully. In the last 15 years I have worked from start-up to big corporates. As a product manager, head of product and founder, I was able to witness and shape transformations companies go through. Best case, I can contribute just a little bit to guide those organisations to a more successful way.

Innovative tech companies enable their product teams, by having the core roles in the team: design (typically in form of a product designer), engineering (in form of software engineers) and the person that makes sure the user needs are met in a way that makes the business stronger (in form of a product manager). With these roles combined, they make sure the team has all the know-how to act quickly. Embedded in the company strategy yet decoupled from too many dependencies which would slow their experimentation pace and thus innovation pace down. They are empowered to come up with innovative solutions that will push the company forward. Those teams are product teams and their reason for being is innovation.

However, moving from one model to this model does not happen without someone organising the change and it clearly does not happen overnight. The question is, how to become a company that runs empowered product teams?

Let’s first understand the landscape, in which companies exist. Imagine three triangles, one for each type of company. Together they form the whole landscape:

Companies, that are not aiming for innovation

There are companies that are simply not aiming for innovation. They work in a cash cow mentality mode. They keep their earnings up with their existing solution as long as possible. This will only work until another company comes along and takes their market share away. This can take months or years, but eventually a competitor will chase them. What you sometimes see are spin offs that are decoupled from the rest of the org to enable this spin off to innovate. The org tries to set them in one of the following two triangles because they realised they need to come up with meaningful innovations again.

Companies that run feature teams

The second type of company has organised people in so-called feature teams. They aspire to innovate and usually have teams organised to work on products. However, there is one important thing to realise. The teams are told from above which features to work on. The business intelligence is not embedded in the team and decisions on what to work on are therefore coming from somewhere else. Typically from the CEO or representatives.

They might have a person holding the title of a product manager. Without the empowerment though, this person merely acts as a project manager or a product owner administrating the backlog. As they are not set up as a product team, they are not coming up with a stream of innovations they were hoping for. Without the empowerment, they lack the user focus and learnings from constant experimentation. They are too far away from their user’s problems and can’t understand the user’s needs. They can’t assess if their features are actually helping their users or make their experience even worse. Those teams usually work on optimisations, but their work is not pushing the company forward.

Don’t get me wrong. Those teams often work very hard, but are stressed out by not seeing the results their stakeholders hope for. What’s missing within the feature team model is the trust of the executives to hand down to the product teams the decision on the solution. In fact, companies running feature teams are funding features to get them developed. The team is a cost factor to reach this. In the following paragraph, we will see that a true product company acts differently.

Companies that run empowered teams

In an empowered team model, the product manager is responsible and accountable for the value the team is creating. Which is the business side of the product. The executives trust their product teams to come up with the right solutions to problems the organisation has defined to solve.

Product organisations are problem focused. Focused on solving an identified problem for the users that will help the company get stronger. As there are many opportunities to solve different problems, which one to focus on is decided on top of the organisation. That’s in the form of a strategy or objective, depending on the time frame.

Those organisations understand that not the executives nor sales nor business development should decide on the solution. The objective to solve a problem is handed down to the product teams. The product manager in such a team understands that the team’s job is to find solutions that resonate with the users and make sense for the business in order to fulfil the objectives and move forwards within the defined strategy. For the product manager that means not only spending lot’s of time with the team, but also with the users and the many stakeholders within the organisation. The outcome is a constant stream of smaller and larger innovations that makes the company stronger. This type of organisation is what we consider a true product company. This type of company funds teams and gives them problems to solve. The team is not a cost factor anymore. It is a business enabler.

Transforming towards product

To transform a feature team towards an empowered team, you have to start from the top. The understanding that constant innovation will keep their organisation successful and the understanding of how innovation is enabled through the right organisation. Both need to be understood and supported from above. The executives need to understand that the chances of innovation increase by enabling your product teams to experiment to find the winning solution. In most cases this is a big change for the leaders of the company. It shifts their role from micromanaging single topics, timelines and roadmaps to enable teams to manage those themselves. A successful leader is able to report on the performance of the team in reaching higher objectives, not on how many features have been shipped.

I have seen startups, medium sized companies and big banks from the inside. One common denominator for a successful transformation in these companies was a person with influence on the executives, who strongly defends it when things don’t go as planned. You need someone on the executive level with a track record of contributing in such an environment. The executive’s former company must have been a successful product company because of the executive, not despite. This is the most crucial starting point. This person needs to help you to make sure the organization has a strategy, is willing to fund the teams and willing to let them work out multiple possible solutions to the problems defined.

Once you made sure the company is willing to transform, you need to coach in two directions: the executives need to learn and embrace how innovation can be facilitated best with products leveraging technology. The product managers and the teams they are part of need to understand their role and be continuously trained to fill it:

• You need to make sure the company has a clear picture of where they want to be in the future (the vision) and a path towards that future state (the strategy). The strategy is focusing the company on the important problems to solve. It serves as a clear guidance for the product teams what problem to work on. If you don’t have this guidance, teams will not be able to cohesively decide what to work on and the executives will keep deciding for you.

• Once you have the strategy in place, you need to shift the company from priorities to focus. It’s easy to put 100 items in an order, but to make sure all the power goes into the most relevant things, you need the company to focus on a very small amount of problems. All the rest of the ideas are put aside and not touched. No project backlog that’s administered, no idea prioritisation round, no steering committee. All of the people in your company need to learn to focus on the problems the strategy decided to work on.

• Product companies do not fund ideas, but teams. You need to make sure one team after the other is being funded, recruited and empowered to work on the problems identified. You need experienced product managers, product designers and engineers. Internal and with a track record of working like this. You need to make sure the people you hire have actively worked in an actual product team before. That’s especially important for the first product team you build or change. Once you have a strong team, you build the next one and keep on coaching the existing one. This way you make sure, you can give the necessary decision power to the teams and make the rest of the company trust them by seeing the change the company is looking for.

• The whole organisation needs to have an outcome mindset. You celebrate real successes not being busy with shipping features. Successes that solve the defined problem, move metrics in the right direction and make the company stronger. The feature itself is just a way to reach the desired outcomes. There is no inherent value to a shiny new feature. It’s what it does to the users and how it improves their lives. Teams can be and should be proud of the things they do. At the same time everybody needs to understand that this is not enough to make your company stronger.

Those are starting points. Each one of them is huge and it will take some time before you can check them off. In my experience, one step after the other works best. To make sure the organisation has actually changed and does not snap back to old habits, you need to actively manage it. Starting too many steps in parallel will lead to unfinished bits and pieces and risking your efforts to be without lasting impact.

Next steps: books I consider a must read:

Marty Cagan: Inspired

Petra Wille: Strong, coming end of 2020

Christina Wodtke: The Team That Managed Itself

Eric Schmidt, Jonathan Rosenberg: How Google Works