Product teams have significant advantages over functional teams in bringing digital technology to the core of value creation. With product teams, you can make your company fit for the future and leverage digital technology as a differentiating factor.
Agile principles are a way to circumvent the disadvantages of traditional waterfall projects. However, the introduction of agile principles often fails due to the organizational structure. Thus, employees can be bound in a functional organization and at the same time be required to work in an agile manner in various projects. However, the classic functional organization stands in the way of agile principles. A product organization has a better chance of bringing digital technology to the core of value creation and taking IT, which is optimized for cost, out of the shadow of the business. In our experience, the path to a product organization is best achieved in small steps. Therefore, say goodbye to the idea of converting everything at once. Start small, learn from every step your organization takes, and always keep the shared vision in mind.
Technology for differentiation
Technology is a key differentiating factor today. Continuing to view technology development and (IT) infrastructure as supporting activities and splitting them off into functional teams is possible, but would be fatal. Indeed, they have become differentiating factors in the marketplace. They are based on fast market access, proximity to the customer and short development cycles. Taking advantage of this requires a different product-based organization that combines all the functions involved in developing and selling a product into one team, enabling it to respond more quickly to customer needs. Because software development is much more a design process than a production process. Creative attempts at solutions take the place of rigid procedures. In a design process, the team finds out what the customer really needs and how it can make the customer happy. Hypotheses to maximize customer value are constantly reviewed and adjusted as needed. The product team therefore works with clear objectives that describe the value for the customer, rather than a checklist of ready-made measures.
Where do I begin?
But how do you get there? What is the right way to shape functional teams into product-oriented teams? As with any change, there will be a variety of employees who are for or against it – some won’t care.
If you want to successfully master the path towards product teams, it is therefore important to approach the change step-by-step. Start with a product that your company's future doesn't hinge on, but is well-known and popular enough within your company to act as a beacon. As an organizational framework, you can set up a project to (further) develop this product. This will create the time and formal scope within your existing governance to be able to set up a product team. The difference to many other projects is the required amount of resources and therefore budget. Here it is essential that the project participants devote 100% of their working time to the project and cannot be distracted by line tasks of their functional organization. Distractions from other priorities outside the product team must be eliminated. In order to have a suitable time frame, set the project duration to at least six months and start with a discovery phase to determine the vision and goals of the project.
Who will join the team?
The composition of the product team represents an important challenge. Successfully launching a digital product requires a variety of different skills. With few exceptions, all required skill sets should be present within the team. This includes skills from the business as well as from IT or the digital team. This ensures that the team can work autonomously and is not dependent on the free capacities of functional teams. The latter would result in the product team having to wait for free availability, thus slowing things down. There will be times, especially in the beginning, when individual team members have spare capacity. In reality, however, it will quickly become apparent that free capacity is used in the best interests of the team. The common goal of the product team, consisting of people with different skills and backgrounds, ensures close cooperation. For example, team members will usually take on tasks outside their original role if doing so helps the team succeed. This is because the success of each individual is measured by the success of the team.
When choosing the right members, however, it is not only the individual function that plays a role. The people that make up the initial product team should cover all the required skills that are relevant to successfully develop and market the product. Also pay attention to the strength of each team member. An all-star team will most likely be successful, but runs the risk of not being taken seriously within the organization. It can be easy to get the impression that your experiment is only successful because you brought together the best people in the organization. It is therefore important to find a good balance in order to paint a realistic picture of future product teams. The diversity of the team members’ experience adds up to the strength of the team.
How to make success measurable?
To measure success, first define a vision as well as goals and specific success metrics within the product team. These “measures of success” are used to help you determine the actual success that the product team is achieving. Here, not only financial KPIs play a role, but also the value of the product for the customer. One tool you can use for strategic planning is a Lean Value Tree (LVT) from the EDGE Operating Model. At the forefront of the LVT is the vision that the company or division is pursuing. This is broken down into goals. Below the goals, the team collectively hypothesizes ways to achieve each goal. They prioritize these as a team and work along the priority to test the hypotheses. Prioritization should always be based on the value expected for the customer and not just on a purely financial analysis. For this, it is important that the project team is in contact with the customers and understands their needs. Prioritized by customer value, the project team knows what to do to achieve that value. The team executes this chain of initiatives on its own and keeps feeding the findings back into the process. Thanks to the cross-functional composition, the product team is not dependent on external resources. This gives the product team speed to incorporate findings into the product at short notice. After the first three months and again after six months, take (interim) stock.
Talk about it
As you move toward your product organization, please don’t skimp on communication. Both the experiments and the entire development process should be visible within the company. The goal is to transport the potential of working in product teams into the organization. Each team member acts as an ambassador in this new way of working, carrying the product team’s insights and successes into the organization. Over time, the organization will recognize the value and the pilot will become a highly regarded example of how it can achieve goals in a short period of time. Step by step, you can now form additional product teams that draw on a few really necessary functional teams for special topics.
The steps at a glance
- Identify a pilot product.
- Set up a project running for at least six months as a framework.
- Select the cross-functional team (important: do not staff the team from the “stars” of the functions, otherwise the success of the project will be attributed to this special team).
- Jointly define the vision of the product (top of the Lean Value Tree).
- Jointly define the goals and hypothesize how these goals are to be achieved by the product team (these are the basis for iterative testing and development within the product team).
- Initiate regular and open communication and maintain it throughout the entire project period.
- Take a look back after six months and communicate the results openly.
- Initiate additional product teams upon completion of the pilot.
Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.