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TRANSFORMED: Moving to the Product Operating Model

Authors: Marty Cagan, Lea Hickman, Christian Idiodi, Chris Jones, Jon Moore, Marty Cagan, Lea Hickman, Christian Idiodi, Chris Jones, Jon Moore

Overview

This book, TRANSFORMED: Moving to the Product Operating Model, is a guide for companies seeking to transition to a product-led approach, emphasizing continuous innovation and customer value. It targets product teams, leaders, executives, and coaches, offering a practical framework for navigating the complexities of this transformation. The book’s relevance stems from the increasing need for companies to adapt to rapidly changing markets and leverage technology effectively. It builds upon the concepts introduced in my previous books, INSPIRED and EMPOWERED, providing a roadmap for implementing those concepts within an organization. I discuss common pitfalls, like feature factories and neglecting technical debt. Central to the book is the argument that transformation is about changing how you build (iterative development), solve problems (empowered teams), and decide which problems to solve (product strategy). The book emphasizes the importance of strong leadership, the CEO’s role as the chief evangelist, and cross-functional collaboration between product, design, engineering, and other departments like sales, marketing, and finance. Case studies and examples from successful companies like Almosafer, CarMax, Trainline, Datasite, Adobe, and Kaiser Permanente are used to illustrate the principles and demonstrate their practical application. The book concludes by summarizing key takeaways, stressing that successful transformation requires a commitment to continuous learning, adaptation, and a culture that values outcomes over output.

Book Outline

1. Who Is This Book For?

This chapter introduces the book’s purpose: to explain the product operating model, demonstrate its viability, and inspire product innovation. It also clarifies the book’s target audience, which includes product teams, leaders, executives, and coaches.

Key concept: The product operating model is about consistently creating technology-powered solutions that your customers love, yet work for your business.

2. What Is a Product Operating Model?

This chapter defines the product operating model: a conceptual model centered on using technology to power business, emphasizing continuous innovation and customer value while aligning with business goals.

Key concept: The product operating model is not a process, or even a single way of working. It is a conceptual model based on a set of first principles that strong product companies believe to be true.

3. Why Transform?

This chapter explores the motivations for companies to transform, highlighting three main drivers: competitive threats, compelling prizes (financial rewards), and frustrations of leaders with existing technology investments.

Key concept: Companies transform because they believe they need to be able to successfully take advantage of new opportunities that arise and effectively respond to serious threats.

4. A Typical Transformation

This chapter presents a common transformation scenario where a company attempts to modernize but faces friction due to insourcing challenges, resistance from sales, technical debt, and slow progress, ultimately leading to failure.

Key concept: Numerous challenges were taken on in parallel, not least the insourcing of engineering.

5. The Role of the CEO

This chapter emphasizes the crucial role of the CEO as the chief evangelist for the product model, highlighting the need for CEO support to overcome resistance from stakeholders and drive cultural change.

Key concept: The company cares about what the leader cares about.

6. A Guide to TRANSFORMED

This chapter provides a roadmap to the book’s structure, including sections on transformation definition, product model competencies, concepts, real-world examples, transformation techniques, and overcoming objections.

Key concept: Beyond the case studies, the book is organized into the following parts…

7. Changing How You Build

This chapter focuses on shifting from project-based to product-based development, emphasizing frequent, small releases, instrumentation, monitoring, and continuous improvement to maximize value and minimize technical debt.

Key concept: Your technology investment is all about creating value for your customers and your company.

8. Changing How You Solve Problems

This chapter discusses shifting from feature teams to empowered product teams focused on solving problems for customers, not just building features, highlighting the importance of product discovery and collaboration with stakeholders.

Key concept: Empower teams with problems to solve.

9. Changing How You Decide Which Problems to Solve

This chapter focuses on changing how companies decide which problems to solve, moving from stakeholder-driven roadmaps to insight-driven product strategies led by product leadership.

Key concept: Disrupting product planning.

10. Product Managers

This chapter describes the essential role and responsibilities of product managers in the product model, emphasizing deep customer and business understanding, and the need for direct access to users, data, and stakeholders.

Key concept: Your head of product will be judged by her weakest product manager.

Essential Questions

1. What is the product operating model, and how does it differ from traditional approaches?

The product operating model is a conceptual model centered on using technology to drive business value. It emphasizes continuous innovation and customer-centricity, focusing on solving problems, not just building features. It requires changes in how teams are structured and how they collaborate, emphasizing direct access to users, data, and stakeholders, as well as continuous delivery through small, frequent releases. It also requires a shift in mindset, from prioritizing predictability to valuing learning and experimentation, and from serving internal stakeholders to serving customers.

2. Why should companies transform to the product operating model?

Companies choose to transform due to several factors: competitive threats, compelling financial rewards, and frustrations with existing technology investments. These can include slow development cycles, inability to innovate, low return on investment, and difficulty in adapting to changing market dynamics. Often, a combination of these factors drives the need for change, as companies realize they need to be more responsive to opportunities and threats and to leverage technology more effectively to achieve business goals.

3. What are the common challenges companies face during transformation, and how can they overcome them?

Common obstacles include resistance from stakeholders accustomed to controlling technology resources, difficulties in insourcing engineering talent and managing technical debt, the need for new skills and competencies in product, design, and engineering, and the challenge of fostering a culture of true collaboration and experimentation. Often, companies struggle with changing existing job descriptions, role balancing, and shifting from project-based funding to funding durable product teams focused on outcomes.

4. How is transformation success measured, and what are the ultimate benefits for the company?

Transformation success is measured by demonstrable business results – not just output, but outcomes that create value for both customers and the business. It also involves changes across the entire organization, impacting how different departments like sales, marketing, and finance interact with the product organization. The real test is the ability to respond quickly to market changes and opportunities and to consistently deliver new value to customers, as evidenced by increased customer satisfaction, revenue growth, and higher company valuation.

5. What is the role of the CEO in driving successful transformation?

The CEO plays a critical role as the chief evangelist for the product model. They need to actively support the transformation, communicate the strategic context to the organization, and address any resistance from key stakeholders. The CEO’s commitment signals the importance of the transformation and sets the tone for the entire company, creating a culture where teams are empowered to focus on outcomes and where innovation is valued over predictability.

1. What is the product operating model, and how does it differ from traditional approaches?

The product operating model is a conceptual model centered on using technology to drive business value. It emphasizes continuous innovation and customer-centricity, focusing on solving problems, not just building features. It requires changes in how teams are structured and how they collaborate, emphasizing direct access to users, data, and stakeholders, as well as continuous delivery through small, frequent releases. It also requires a shift in mindset, from prioritizing predictability to valuing learning and experimentation, and from serving internal stakeholders to serving customers.

2. Why should companies transform to the product operating model?

Companies choose to transform due to several factors: competitive threats, compelling financial rewards, and frustrations with existing technology investments. These can include slow development cycles, inability to innovate, low return on investment, and difficulty in adapting to changing market dynamics. Often, a combination of these factors drives the need for change, as companies realize they need to be more responsive to opportunities and threats and to leverage technology more effectively to achieve business goals.

3. What are the common challenges companies face during transformation, and how can they overcome them?

Common obstacles include resistance from stakeholders accustomed to controlling technology resources, difficulties in insourcing engineering talent and managing technical debt, the need for new skills and competencies in product, design, and engineering, and the challenge of fostering a culture of true collaboration and experimentation. Often, companies struggle with changing existing job descriptions, role balancing, and shifting from project-based funding to funding durable product teams focused on outcomes.

4. How is transformation success measured, and what are the ultimate benefits for the company?

Transformation success is measured by demonstrable business results – not just output, but outcomes that create value for both customers and the business. It also involves changes across the entire organization, impacting how different departments like sales, marketing, and finance interact with the product organization. The real test is the ability to respond quickly to market changes and opportunities and to consistently deliver new value to customers, as evidenced by increased customer satisfaction, revenue growth, and higher company valuation.

5. What is the role of the CEO in driving successful transformation?

The CEO plays a critical role as the chief evangelist for the product model. They need to actively support the transformation, communicate the strategic context to the organization, and address any resistance from key stakeholders. The CEO’s commitment signals the importance of the transformation and sets the tone for the entire company, creating a culture where teams are empowered to focus on outcomes and where innovation is valued over predictability.

Key Takeaways

1. Focus on Outcomes, Not Output

The product operating model emphasizes customer-centricity and outcomes over output. Feature factories, focused solely on delivering features, often fail to create real value. Empowered product teams, on the other hand, are given problems to solve and are held accountable for business results. This shift in focus ensures that the work being done directly contributes to the company’s success by solving real customer problems, leading to increased customer satisfaction and business impact.

Practical Application:

An AI product team could be tasked with improving the accuracy of a machine learning model. Instead of simply focusing on increasing accuracy metrics, the team could focus on the outcome: reducing the error rate in a specific customer-facing application. By framing the problem in terms of customer impact, the team is more likely to develop solutions that are both effective and meaningful to the user.

2. Prioritize Product Discovery

Product discovery is crucial for mitigating risks and ensuring that solutions are worth building before investing heavily in development. It involves rapid experimentation, prototyping, and user testing to validate ideas and assumptions quickly and inexpensively. By testing early and iterating based on feedback, product teams can avoid costly mistakes and increase the likelihood of delivering successful products that meet customer needs and business goals.

Practical Application:

In developing a new AI-powered feature, the team could use rapid prototyping and user testing to assess value risk (will customers use it?), usability risk (can customers easily understand and use it?), feasibility risk (can we build it with the technology we have?), and viability risk (does it align with business goals and regulatory requirements?). By addressing these risks early, the team avoids wasting time and resources building something that won’t work.

3. Collaborate with Stakeholders

Stakeholders can be essential partners in the product development process. By actively involving stakeholders, product teams can gain valuable insights, address concerns, and ensure that solutions meet the needs of all parties involved. Building trust and collaboration with stakeholders is essential for navigating the complexities of organizational change and ensuring successful transformation.

Practical Application:

An AI product leader, responsible for multiple AI teams, could hold regular stakeholder briefings to address concerns about data privacy, algorithmic bias, or job displacement. By proactively addressing these concerns and involving stakeholders in the process, the leader can build trust and ensure alignment across the organization.

4. Embrace Continuous Delivery

Continuous delivery, through small, frequent releases, is essential for responding quickly to feedback, mitigating risks, and accelerating time to market. It also fosters a culture of continuous improvement and innovation, allowing teams to iterate on products based on real-world data and customer feedback.

Practical Application:

An AI product team building a recommendation engine could start by releasing a minimally viable product (MVP) to a small group of users. Based on the usage data and feedback collected, the team could then iterate on the product, adding new features and improvements in small, frequent releases. This approach allows for continuous learning and adaptation, leading to a better product and happier customers.

5. Optimize Team Topology

A well-defined team topology is essential for clarifying roles, responsibilities, and team interactions. It is important to optimize for loosely coupled teams that can operate autonomously, while maintaining high alignment through a shared product vision and product strategy. A platform team approach can help to reduce dependencies, manage complexity, and enable product teams to focus on delivering customer value.

Practical Application:

A company developing an AI-powered product could invest in a platform team to develop a shared identity management system, a common data platform, or a set of reusable machine learning models. This reduces duplication of effort, promotes consistency, and creates leverage for the product teams building AI features.

1. Focus on Outcomes, Not Output

The product operating model emphasizes customer-centricity and outcomes over output. Feature factories, focused solely on delivering features, often fail to create real value. Empowered product teams, on the other hand, are given problems to solve and are held accountable for business results. This shift in focus ensures that the work being done directly contributes to the company’s success by solving real customer problems, leading to increased customer satisfaction and business impact.

Practical Application:

An AI product team could be tasked with improving the accuracy of a machine learning model. Instead of simply focusing on increasing accuracy metrics, the team could focus on the outcome: reducing the error rate in a specific customer-facing application. By framing the problem in terms of customer impact, the team is more likely to develop solutions that are both effective and meaningful to the user.

2. Prioritize Product Discovery

Product discovery is crucial for mitigating risks and ensuring that solutions are worth building before investing heavily in development. It involves rapid experimentation, prototyping, and user testing to validate ideas and assumptions quickly and inexpensively. By testing early and iterating based on feedback, product teams can avoid costly mistakes and increase the likelihood of delivering successful products that meet customer needs and business goals.

Practical Application:

In developing a new AI-powered feature, the team could use rapid prototyping and user testing to assess value risk (will customers use it?), usability risk (can customers easily understand and use it?), feasibility risk (can we build it with the technology we have?), and viability risk (does it align with business goals and regulatory requirements?). By addressing these risks early, the team avoids wasting time and resources building something that won’t work.

3. Collaborate with Stakeholders

Stakeholders can be essential partners in the product development process. By actively involving stakeholders, product teams can gain valuable insights, address concerns, and ensure that solutions meet the needs of all parties involved. Building trust and collaboration with stakeholders is essential for navigating the complexities of organizational change and ensuring successful transformation.

Practical Application:

An AI product leader, responsible for multiple AI teams, could hold regular stakeholder briefings to address concerns about data privacy, algorithmic bias, or job displacement. By proactively addressing these concerns and involving stakeholders in the process, the leader can build trust and ensure alignment across the organization.

4. Embrace Continuous Delivery

Continuous delivery, through small, frequent releases, is essential for responding quickly to feedback, mitigating risks, and accelerating time to market. It also fosters a culture of continuous improvement and innovation, allowing teams to iterate on products based on real-world data and customer feedback.

Practical Application:

An AI product team building a recommendation engine could start by releasing a minimally viable product (MVP) to a small group of users. Based on the usage data and feedback collected, the team could then iterate on the product, adding new features and improvements in small, frequent releases. This approach allows for continuous learning and adaptation, leading to a better product and happier customers.

5. Optimize Team Topology

A well-defined team topology is essential for clarifying roles, responsibilities, and team interactions. It is important to optimize for loosely coupled teams that can operate autonomously, while maintaining high alignment through a shared product vision and product strategy. A platform team approach can help to reduce dependencies, manage complexity, and enable product teams to focus on delivering customer value.

Practical Application:

A company developing an AI-powered product could invest in a platform team to develop a shared identity management system, a common data platform, or a set of reusable machine learning models. This reduces duplication of effort, promotes consistency, and creates leverage for the product teams building AI features.

Suggested Deep Dive

Chapter: Chapter 8: Changing How You Solve Problems

This chapter provides the most direct guidance for AI product engineers on how to shift their mindset from simply building features to solving customer problems using techniques like product discovery.

Memorable Quotes

Chapter 2: What Is a Product Operating Model?. 27

Nothing you will read in this book was invented by us.

Chapter 5: The Role of the CEO. 37

The company cares about what the leader cares about.

Chapter 8: Changing How You Solve Problems. 57

Design is not just what it looks like and feels like. Design is how it works.

Chapter 10: Product Managers. 73

Your CEO should believe that each of your product managers has the potential to be a future leader of your company in the next five or so years.

Chapter 12: Tech Leads. 85

Innovation absolutely depends on empowered engineers.

Chapter 2: What Is a Product Operating Model?. 27

Nothing you will read in this book was invented by us.

Chapter 5: The Role of the CEO. 37

The company cares about what the leader cares about.

Chapter 8: Changing How You Solve Problems. 57

Design is not just what it looks like and feels like. Design is how it works.

Chapter 10: Product Managers. 73

Your CEO should believe that each of your product managers has the potential to be a future leader of your company in the next five or so years.

Chapter 12: Tech Leads. 85

Innovation absolutely depends on empowered engineers.

Comparative Analysis

While several books address product management and organizational transformation, TRANSFORMED offers a unique perspective by emphasizing the shift to a product operating model. Unlike books that focus solely on Agile methodologies or design thinking, this book provides a comprehensive framework that encompasses various aspects of product development, including strategy, discovery, delivery, and culture. It also directly addresses common objections from different stakeholders and provides practical solutions. Compared to Clayton Christensen’s The Innovator’s Dilemma, which focuses on disruptive innovation from a market perspective, TRANSFORMED offers an internal, organizational perspective on achieving continuous innovation. Similarly, while books like INSPIRED and EMPOWERED delve into best practices for product teams and leaders respectively, this book bridges the gap by explaining how to transform the entire organization to support those practices. Its focus on real-world case studies, especially during the pandemic, also sets it apart from more theoretical works, providing tangible evidence of the model’s efficacy.

Reflection

TRANSFORMED provides a valuable roadmap for companies seeking to adopt a product-led approach, particularly those struggling with traditional, project-based models. The emphasis on empowering teams and focusing on outcomes is crucial for driving innovation and customer value. However, a skeptical reader might question the feasibility of implementing these changes in organizations with deeply ingrained hierarchical structures. While the book acknowledges these challenges and offers solutions, it may underestimate the resistance to change from individuals and departments protecting their existing power and responsibilities. The book’s strength lies in its practical approach, real-world examples, and emphasis on continuous learning and adaptation. It provides concrete techniques and tactics for navigating transformation, addressing objections from various stakeholders, and building a strong product culture. However, a potential weakness is the lack of detailed guidance on specific technologies or tools, which might require additional resources. Overall, TRANSFORMED is a significant contribution to the field of product management and organizational transformation, offering a clear and actionable path to building a product-led company capable of continuous innovation and growth in today’s rapidly changing market.

Flashcards

What is the product operating model?

A conceptual model based on a set of first principles used by strong product companies, centered on using technology to power the business.

What is the core purpose of empowered product teams?

Focus on solving customer and business problems, not just building features.

What is the purpose of product discovery?

Rapidly testing product ideas with minimal waste to quickly validate solutions worth building.

What is the key to reliable product delivery?

Delivering small, frequent, uncoupled releases that are instrumented and monitored.

What are the core principles of product strategy?

Focus, insights-driven decision making, transparency, and placing bets.

What are the ten keys to successful transformation?

CEO as the chief evangelist, strong product leaders, true product managers, professional product designers, empowered engineers, insights-based product strategy, stakeholder collaboration, continuous evangelization of outcomes, corporate courage.

What is the product operating model?

A conceptual model based on a set of first principles used by strong product companies, centered on using technology to power the business.

What is the core purpose of empowered product teams?

Focus on solving customer and business problems, not just building features.

What is the purpose of product discovery?

Rapidly testing product ideas with minimal waste to quickly validate solutions worth building.

What is the key to reliable product delivery?

Delivering small, frequent, uncoupled releases that are instrumented and monitored.

What are the core principles of product strategy?

Focus, insights-driven decision making, transparency, and placing bets.

What are the ten keys to successful transformation?

CEO as the chief evangelist, strong product leaders, true product managers, professional product designers, empowered engineers, insights-based product strategy, stakeholder collaboration, continuous evangelization of outcomes, corporate courage.