Product Transformation: Identifying your drivers and leverage

This article is about transformation drivers in product companies. By that term we mean forces applied to your organization that indicate a need to adapt and change.

In a functional sense, they are the highest leverage reasons for why we “can’t just stay the same” and expect to be successful.

The word transformation indicates major change. So what we mean here is change needed at a holistic level. Something that goes beyond just tuning a single aspect of what we do. A need for change that when resolved will likely have impacted multiple disciplines of your company at a system level.

Why understanding your transformation drivers will help you

Change is dual in that there is both a sense of leaving something that exists and a sense of entering something new. Both of these dual aspects need to be honored, to take full ownership of the transition as an evolution from something into something else.

To proactively make the choice to embrace major change in a skillful way, you have to become in tune with these forces asking for change, pay attention and interpret them. Then you are well set to decide to act on them in an effective way.

Common transformation drivers in product companies

To establish a baseline, let’s take a look at some of the most common drivers for why product companies decide to transform and change how they fundamentally operate.

Technology becoming a business enabler - The role of technology in how we offer value to the market has become more important. Success now requires a higher degree of cross disciplinary collaboration than before, especially relating to the value creation element of key technology in our products. We have come to accept this increasing tech component and closer customer collaboration as necessary to enable the market offerings we are targeting. Where we expect the market to go this will only be amplified, so we need to embrace this as fundamental.

Not diverse or unique - There is a lack of novelty and uniqueness in our current market offering. Our products and services are valued by our customers, but are too similar to offers from our competitors. This over-parity means our prices and margins are under pressure and our offerings are increasingly seen as a commodity. For a long time we have lacked an edge that sets us apart from chasing the pack.

Weak demand, can’t compete - Our current offerings are struggling to attract the demand from the customer segments we are targeting. Our value offering is weak or questionable making us uncompetitive. Our products are just not adding enough value to the market and we are becoming less relevant to customers. We need to rebuild our ability to understand what customers need, and the capability to develop products that strongly fit those needs with strong solutions, to improve our market relevance.

Failing work environment, hard to secure talent - we can’t attract, develop and retain the people we need to succeed. This driver has two parts. The first is the employee experience of our staff. It needs to be healthy, motivating and valuable so good people can do good work. If this experience is poor, that needs to be our first priority to improve. The second is the perception of our workplace from the point of view of people outside the company.

Growth transition from single decision maker to strategy driven - because of our success, we are facing the challenge to scale beyond the capabilities of our initial operating model. During our early founder years we could operate with one decision maker who understood the product direction and personally created alignment in each part. As we grew, this model led us to grow the parts that make, but not grow the parts that understand and make product decisions. To continue to grow, we now need to shift into a shared strategy approach, to enable well informed alignment, over multiple decision makers over many parts.

Inability to replace old revenue streams in time - our established products are ageing. We see the emerging new opportunities in the market and are investing. But we lack the capability to consistently develop new successful products into new growing revenue streams quickly enough to sustain the company into the future. We are too slow. We have the position and the know-how, but we just don’t have the leadership and way to operate to put all of it together into great new offerings and hit market windows.

Poor return on investment in product development - the gap between ambition and outcome is too significant in our value creation investments. The current risk of failure has been too high, and the ceiling of success too low. Because of this, the valuation of our company is not measuring up to expectations. We want to embrace approaches similar to how other very successful product companies operate.

Finding your own highest leverage drivers for change

The list above is a synthesis and a summary over many aggregated situations. It is a useful list to understand the playing field.

However, it is important to understand that it is unlikely to be a good description of one single situation. Your company’s situation is not a synthesis. It is real, and it has its own details and complex dynamics.

So don’t copy what you are personally attracted to from this list and say this is your driver, that just won’t work.

Instead, look for a way to describe your own highest leverage reasons for major change as authentically as possible. It is likely that your situation shares elements of one or several of the drivers described above. It may also express drivers with some unique aspects.

Let’s take a look at what that might look like.

A real example from the field

This company had been buying product companies in different parts of Europe, each with their local market. The idea behind this was to grow revenue by acquisitions and to open up access to potentially sell these products in other parts of Europe. The set of products acquired were diverse and significant, but all in the area of market information and data.

After this phase of acquisitions the company shifted its focus, to create more cohesion and to organize a shared product direction. This was prompted by a few unanswered questions. We have opened up potentially larger access for all these products, through our network effect of local reach in many European countries. But what should be our major investment bets for the future? Should these investments replace existing products, or should they target different segments? And how do we transition from cross-selling existing products, to creating new products for potentially all of these regional markets?

A few steps were identified as critically important. Build an integrated group tech organization, capable of delivering solutions for future group bets. Build a group product organization that can take a market opportunity where we want to make a major investment, and turn that into a product with clear demand and potential to become the future of our business.

The company was well on its way in establishing this, but left unresolved were a few key challenges. Both the group product and group tech organization experienced a major challenge in working closely with customers. The many country offices had local sales and marketing staff, including some tech staff. It had not been fully determined how these would integrate into the group organization, for the development of new group product bets.

Additionally, there was a history of tech and product not collaborating closely enough. That is, tech staff rarely met customers and did not have a strong established way of collaborating closely with product, to solve customer problems. Both product and tech desired closer collaboration, and more frequent and direct contact with customers for the segments and the customer needs they were targeting.

Additionally, because of this tension between the limits of the current operational setup, and the aspirational group bet goals, the current employee experience in product & tech was poor with high turnover and low employee satisfaction levels.

These factors combined made a shared effort very important. Senior leadership of both product and tech understood and agreed that without making these shifts, it was unlikely that the big product investment bets for the future would be successful. A different operational setup was needed, and it needed to be led differently. This was necessary for the potential of the company to be realized.

In this example, we can try to express the transformation drivers in the following way:

• The need to shift from - a company with over a hundred products, each selling to a local market and with the access to sell to other markets in many countries - to a company making group investments in group scale products, targeting large segments of a European market. A new way of leading and operating was required to succeed with this shift.
• If this shift would fail, the company would be unlikely to succeed in replacing existing revenue streams with new revenue streams that can capture the full potential of a large European product company. The valuation of the company was at stake.
• High turnover in product & tech staff, with good people leaving prematurely because of a problematic employee experience. There was tension between the engaging goals and the current operational setup, which was experienced as too much of an obstacle.

What to do to align on your leverage

There are many ways you can explore your forces for change to find your own drivers. Here is a list of examples of what you and your senior peers can do.

• Regular intelligent leadership team conversations, where we ask to understand. Look for insights and patterns, to compare and integrate leader insights. Explore potential factors influencing your situation.
• Make sure you personally participate in a diverse set of ways, all across the organization. Get first hand impressions from all areas of work.
• Meet customers and understand your market, including competitors, and representatives from society relevant to your business. Understand how you fit into your market environment.
• Explore and evaluate long term trends in the market, in the customer segments of relevance, in technology to understand the future potential of how you can add value.
• Engage in deeper conversations with your peers and reports, where you try to identify challenges and understand why those challenges exist and how they interrelate.

Two things are of high value, when doing this type of work. Experience and reference points from what is possible and what good looks like. Without these you may not fully see the challenges and opportunities that are there.

To ensure you have access to the perspectives you need, you can do two things before starting a major transformation. First, consider adding new people to your senior leadership team, people with strong skills and reference points.

Second, bring in as guides and advisors, people with experience and reference points from successful product transformations.

This can make a big difference.

Summary

Aligning on the real reasons for why we can’t stay the same is a critical part of succeeding with a product transformation.

Actively work with your leadership peers to understand and express clearly what your specific transformation drivers are.

Consider complimenting your leadership team with people who have the experience and reference points that can help you identify and express these drivers, early in your product transformation.

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