Why innovation-driven organisations need the product operating model

The cycle of product development and innovation: a box with a lightbulb, a cog, and circling arrows.

Many companies are transitioning to ‘product mode’ and some are going further to become ‘product led’. This strategic pivot can deliver a competitive edge.

This article explains why companies should adopt a product operating model, identifying the critical junctures in an organisation’s journey where this approach becomes imperative.

It also covers specific anti-patterns. That is, typical responses to recurring problems which cause inefficiency and lead to counterproductive behaviour.

It also sets out the kinds of challenges that can be resolved by adopting this approach. 

Why to adopt a product operating model

A product operating model isn’t just about changing how an organisation is structured. It’s a fundamental shift towards:

  • continuous innovation
  • responsiveness to customer needs
  • iterative development

The most important thing in this approach is delivering value to customers through products and services that evolve based on real-world feedback and changing market dynamics.

The model can be broken down into three key drivers. 

1. Customer-centric innovation 

The primary driver for adopting a product operating model is a desire to focus on customer-centric innovation.

In contrast to project-based models that emphasise output over outcome, the product model champions the development of solutions that genuinely resonate with customer needs and preferences.

This builds customer loyalty and drives growth. 

2. Agility and responsiveness 

In a digital-first world, market conditions and customer expectations change at breakneck speed.

A product operating model lets companies adapt quickly and jump on new opportunities with minimal lag, ensuring they remain relevant and competitive. 

3. Sustainable growth 

Lastly, moving to a product mode lays the groundwork for sustainable growth.

By focusing on long-term product evolution and customer satisfaction, organisations can build a loyal user base. They can reduce churn. And they can unlock new revenue streams.

All of this lays a solid foundation for lasting success.

When to adopt a product operating model 

Recognising the right moment to transition to a product operating model is important for organisations aiming to stay competitive and responsive to market dynamics.

Here are some signs it’s time to make the change.

  1. Market pressure – when traditional methods can't keep pace with the speed of market changes or fail to meet the heightened demands of customers, it’s time for a more agile and flexible approach.

  2. Innovation stagnation – when teams are bogged down by bureaucratic processes, unable to leverage new technologies, or find themselves repeatedly outpaced by more agile competitors, it's time to consider a model that prioritises and nurtures innovation.

  3. Customer feedback loop when products consistently fail to meet user needs, that’s a sign that you’re lacking a robust mechanism for gathering, analysing, and acting on customer. A product operating model emphasises continuous engagement with customers, ensuring that product development is guided by real-world use and feedback.

  4. Difficulty scaling – when the current operating model makes it hard for the organisation to scale, adapt products, or enter new markets quickly, it's a sign that a more scalable approach is needed. This means scaling up to meet increased demand, and scaling down or pivoting when market shifts.

  5. Digital transformation initiatives – when organisations undergo digital transformation, their existing operating models might not support the rapid development, deployment, and iteration of digital products and services. A product operating model can facilitate this transformation by embedding digital capabilities in core business processes.

  6. Organisational silos – when organisational silos impede collaboration and information flow, leading to duplicated efforts and inconsistencies in product development, it indicates a need for a more integrated approach. A product operating model breaks down barriers and fosters cross-functional teams that work together towards common product goals.

  7. Lack of product focus when you find your team spread too thinly across multiple initiatives, without focusing on product development and customer value, it’s time for a rethink. This lack of product focus can dilute efforts and resources, making it challenging to achieve significant advancements in any single area. Transitioning to a product operating model realigns the organisation's focus around its products and the value they deliver to customers.

  8. Cultural misalignment – when the prevailing culture is risk-averse, resistant to change, or lacks a strong orientation towards learning and iteration, it can hold back innovation and responding to market demands. Adopting a product operating model often encourages a cultural shift towards embracing change, experimentation, and continuous improvement.

By changing the organisation's structure, processes, and culture to be more agile, customer-centric and always innovating, businesses can better navigate the complexities of today’s market and achieve sustainable growth.  

Overcoming challenges and anti-patterns  

Moving to a product operating model can also fix existing problems. We often see the following. 

Traditional siloed structures make it hard for people to communicate and collaborate, impeding the free flow of ideas and information. A product operating model promotes cross-functional teams, creating a culture where everyone contributes and shares their unique skills.  

Many organisations fall into the trap of prioritising output, such as the number of new features released, over outcomes like customer satisfaction or engagement. A product operating model helps them focus on delivering value and measuring success based on tangible outcomes. 

Change is difficult, especially for companies that have always done things in a certain way. Transitioning to a product model means embracing experimentation, learning from failures, and celebrating iterative progress. 

A common challenge is the lack of autonomy and decision-making power among teams. A product operating model gives teams ownership over their products, encouraging a sense of responsibility. This setup creates more engaged and motivated workforce who are eager to their best. 

In a culture that penalises failure and discourages risk-taking, people are afraid to experiment. A product operating model encourages taking smart risks and sees failures as learning opportunities that are essential for innovation and improvement. 

Traditional models may not do a good job of allocating resources. They often lead to investment in low-impact initiatives because of legacy priorities or politics. A product operating model helps organisations target resources into what’s most important based on performance, market feedback, and strategic priorities. This ensures resources are focused on high-impact areas.

Organisations often get caught up in short-term objectives, neglecting long-term product health and sustainability. This short-termism can compromise the product's future viability and market fit. A product operating model helps organisations plan for the future, and balance quick wins with sustainable growth and adaptation over time. 

Some organisations churn out features without solving real user problems or delivering value. This ‘feature factory’ mentality leads to bloated products with features that may not meet real customer needs. A product operating model shifts the focus towards outcome-based development, where success is measured by the value delivered to the customer, not just the quantity of features produced. 

How a product operating model helps 

A product operating model helps organisations handle the complexities of modern markets and uncertainty better. It drives innovation and delivers meaningful value to customers.

This leads to sustainable growth, competitive advantage, and being able to adapt quickly.  

Here are the key benefits of a product operating model. 

1. Fosters a long-term perspective  

A product operating model has a strategic road-mapping and outcome-focused planning built in.

This helps organisations balance short-term achievements with long-term product health and market relevance. 

2. Cultivates a culture of experimentation 

The model creates a workplace where experimentation is encouraged, learning from failure is supported, and innovation is actively pursued.

This helps organisations overcome their aversion to risk and challenges. 

3. Encourages value-driven development 

By focusing on delivering value to customers and addressing their real needs, a product operating model ensures that development efforts are aligned with what users truly need.

This helps avoid the trap of becoming a feature factory. 

4. Enhances data-driven decision making 

By prioritising data and user insights over hierarchical opinions, a product operating model ensures that decisions are informed, objective, and aligned with user needs.

5. Ensures resources are used wisely 

Being flexible with resources lets organisations quickly reallocate them to high-impact initiatives.

This helps organisations make the most of what they have and build products efficiently.  

6. Integrates user-centred design 

By making UX research and design thinking a key part of the development process, a product operating model ensures that products are intuitive, user-friendly, and truly meet user needs. 

7. Establishes continuous feedback loops for learning  

A product operating model focuses on rapid iteration cycles and close engagement with users.

This allows for constant learning and swift adaptation, making the product fit the market better over time. 

8. Advocates for technological agility 

A product operating model pushes organisations to keep up with the latest technology and to use modern tools and practices that can enhance product development and performance. 

A foundational shift that propels organisations towards business agility 

When a company decides to adopt a product operating model, it’s like starting a whole new chapter in their story.

It makes them better able to deal with the volatile, uncertain, complex, and ambiguous (VUCA) world we operate in. It puts agility at the core of their strategies.

It fosters an environment where rapid experimentation, iterative learning, and customer-centricity are the norms.

It becomes the driving force behind every decision, process, and customer interaction. It shakes up the organisation culture.

And it unlocks the potential for sustainable growth, competitiveness, and the ability to deliver exceptional value to customers.