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The big product and platform shift: Five actions to get the transformation right
To succeed, incumbent organizations need to take five actions as they scale their product and platform model transformations.
Many incumbent organizations across industries and sectors want to become more like tech companies: fast, agile, and dominant. They’re doing so to remain competitive at a time when B2B and B2C customers have high and rapidly changing expectations and digital disruptors are upending the business landscape.
The key to making this change lies in adopting a technology operating model based on products and platforms. This model organizes technology around user-facing products, to facilitate end-user journeys or experiences (ordering, bill paying, and loyalty programs, for example), and the underlying platforms that enable them, such as customer relationship management (CRM) and marketing technology (MarTech).
The benefits of this product and platform model have been well established. The product and platform model ensures that technology delivery is aligned to the strategy and related priorities. In our experience, it can generate significant business value, spur innovation, improve customer and employee experience, decrease time to market by up to three times, reduce product defects by 50 to 70 percent, improve brand and image perception, and increase operating margins and total shareholder returns. A recent McKinsey survey revealed that at nearly three-quarters of top-performing companies, the most-senior tech leaders are highly involved in shaping company strategy.
The issue, however, is that many companies that want to develop a product and platform model struggle to do so. We analyzed more than 50 organizations across industries and geographies undergoing product and platform operating model transformations. (See sidebar “About our Operating Model Index.”) Although a few companies have met or exceeded their objectives, the efforts of a significant number either have stalled (for various reasons) or were unable to scale following initial progress.
What do the few get right that eludes the many? Our analysis revealed five actions that are critical for transitioning successfully to a product and platform operating model: getting the design of products right, prioritizing platform redesign, partnering with the business, rethinking tech governance, and transforming software engineering practices.
Build product teams around the end-user experience:
In a product and platform operating model, “products” are the technology-enabled offerings—tools, services, or experiences—that allow customers and employees to engage in activities that create value. These might include “search” for a retailer, for example, or “financial planning and analysis” for a finance team. These products can be grouped around a variety of organizing principles, each with a specific team to serve the needs of the end user, deliver on the goals of the business, and align with the organization’s market position or digital maturity. For example, a market leader whose main concern is providing an omnichannel experience will set up multidisciplinary teams organized around products, such as ordering, and provide these products through multiple channels. Platform teams provide and maintain services that product teams consume (such as CRM and authentication).
An effective organizational approach has often been to build product teams around stages of the customer experience surrounding a purchase, from search to payment, or adjacent capabilities, such as loyalty programs or billing functions. Teams might also be organized around the employee experience, from recruitment to onboarding. In these approaches, the emphasis is on models that can be broadly applied and reused.
Each product team will have a mission and be accountable for business outcomes. The teams must be small enough to be effective, yet contain all the cross-functional skills required for the team to function autonomously. It is critical to keep the number of teams manageable. Too many can strain resources while blurring accountability and adding bureaucracy. (See sidebar “Key considerations when creating product teams.”)
A global telco ran into several challenges when it rolled out its digital transformation prior to shifting to a product and platform design for its entire organization. In some product areas (such as promotions and trade-in), multiple business leaders claimed ownership of the same part of the design, and IT struggled to staff and resource them all. This led to a need for increased coordination, which affected the company’s ability to prioritize work and capture value from the transformation. Eventually, the telco paused the scale-up, designed a full product and platform model that addressed skill needs and talent allocations, aligned all stakeholders, and ensured the business assigned a single owner to each product. Only then did it resume scaling the transformation.
Don’t forget the platforms
When embarking on the transformation, companies often assume that simply reorganizing around products will be sufficient. That is rarely the case; indeed, it often results in greater technical debt.
Platform teams focus on making a company’s core systems more accessible, reusable, and better able to support products. Platforms develop and manage the underlying core systems (such as identity and access management and order management) and backbone (such as storage, aggregation, analysis, and provision of data) on which products are built. Products consume the services that platforms develop through APIs and microservices.
When designing and operationalizing platforms, companies should focus on three elements:
- Organization of platform teams: Companies should organize platforms into three groups: business or journey platforms that enable a specific business domain or end-user journey, such as customer data and inventory management; shared platforms that are used by multiple journeys or business domains, such as enterprise resource planning (ERP); and enterprise platforms that power the IT organization, such as identity and access management.
- How platforms interact with product teams: Most organizations have to manage platforms with varying degrees of flexibility. Some platforms, often older ones, are static. In this case, product teams design most of the features they need, and then platform teams do most of the actual build work. Newer platforms or more important platforms (such as e-commerce and chat bots) are built with a modular architecture and accessible via APIs. It’s crucial to assess how modular the platforms are, because that will determine resource needs, scope of work, and dependencies. To do this, the platform owner typically needs to work with product owners to prioritize and sequence the platform road map.
- Platform operations: Modernized platforms will operate like a product team. They will need a single platform owner with a dedicated team (mostly engineers), a vision, a road map, and objectives and key results (OKRs) linked to business outcomes—for example, reducing wait time at the counter by reducing the API response time.