The Importance of Culture When Transforming to a Product-Led Organization

More than ever, organizations are turning to a product-led business model to stay competitive and create value in the face of ever-changing market conditions. They are embracing the increased opportunities and accelerated pace that come with it.

In a product-led model, leaders come to realize that their workforce is key to making change happen. However, it’s unrealistic to expect every employee to adapt to constant change at the same pace. That's why when transitioning to a product-led business, leaders must place an intentional focus on culture and people—a focus that accounts for all levels of your workforce and the varying speeds at which they are likely to evolve.

For many years, business leaders who have participated in North Highland’s proprietary research have acknowledged just how critical it is to put people at the center of change and transformation. But they’ve also highlighted just how challenging it can be to put that into practice. For instance, in a survey we conducted in June 2022, 33 percent of business leaders said they prioritize employee experience and engagement to gain a competitive advantage when defining their transformation strategy. Yet only 19 percent of those leaders said they expected employee experience and engagement to actually be a consideration in their 2023 transformation strategy. This tells us that the follow-through when it comes to the workforce just isn’t there yet.

Our experience confirms this fact: During transformations, many leaders are focused intently on how the transformation will impact the operating model, organizational structure, technology, data, and even the roles required. But too often, they don’t consider the reality that as these components of their business evolve, so too must the culture, their people, and employee ways of working in order to create sustainable change.

"Restructuring without changing the culture is like moving the deck chairs on the Titanic." – North Highland Managing Director Ben Grinnell

As you embark on your next transformation, it’s critical that your culture, people, and ways of working transform in concert with your technology, operating models, data, and more. Both sides of the proverbial equation directly influence each other—in other words, whether and how your transformation succeeds depends on your people, culture, and ways of working.

Today’s leaders must also prioritize people and culture early in their transformations to maximize the impact and unlock the benefits of a product-led business model. This challenge often falls on leaders in the middle of the organization who must balance helping their people change and keeping the business running day to day. For this reason, we begin our engagements with a people-centered approach that recognizes culture and helps teams define how their new ways of working must evolve. This enables leaders and teams to better co-define their own structure and roles, delivering the value promised at the pace needed.

Are you reaping all of the benefits you could from a product-led model, or are you leaving your people and culture behind?

What does product-led mean for your organization?

Let’s start by defining what we mean by a product-led organization. As organizations scale, they typically become more complex, creating functional silos and hierarchies that slow decision-making and decelerate speed to market. Although hierarchy can benefit larger-scale businesses, it can also inhibit a business’s ability to deliver the value expected by customers. Many organizations are beginning to experiment with a blended model of hierarchy and smaller, more nimble teams across their network.

A product-led organization flattens the hierarchical structure by mapping its value chain from end to end—concept to consumer. Many levels of the organization are involved in continuously assessing and prioritizing investment to determine the products and services that will deliver the most value. Because product-led models depend on input from many teams, they promote team empowerment and encourage collaboration, increasing the speed at which new, relevant information can be shared and applied more quickly for investment trade-offs. Investment decisions in both structures impact team performance and organizational culture, but the steady flow of information and speed in product-led cultures requires new ways of working together.

Organizations are recognizing the benefits of becoming product-led, including greater flexibility, increased responsiveness, greater value delivered across projects, and a higher-quality experience for users. However, we see many of our clients struggling to make the transition; that’s what we’ll cover next.

What are the challenges of becoming a product-led organization?

Leaders we’ve worked with have shared some of their most common obstacles when transforming to a product-led business, including:

  • Product managers who struggle to escalate important information or make and implement decisions. Side effects: wasted investments or delays to value delivery.
  • A lack of empowerment among teams to make decisions and/or try to build too much at once instead of making small incremental changes. Side effects: missed deadlines and missed value.
  • Failure to harness all of the team’s skills. Side effects: poor design or execution leading to a poor customer experience.
  • A lack of a shared language or varying communication styles. Side effects: misalignment and confusion around information, processes, the speed of change, and more.
  • Failure to consider the upstream and downstream impacts of a single decision or the team’s activities. Side effects: duplication that causes expensive and inefficient re-work or blocks the organization’s ability to bring value to market.
  • A lack of executive or team buy-in. Side effects: stalled progress and little to no adoption.

To address these challenges and more when adopting product-led practices, leaders must inspire their people to think critically, work differently, and help each other get relevant information to inform good decisions—sometimes without knowing whether they have all of the information.

How can you successfully transform to a product-led model?

Four strategies can help you get started.

1. Keep OKRs visible, relevant, and integrated with teams’ planning, decisions, and activities. It’s not enough to communicate common goals and metrics; the value and relevance must influence day-to-day choices.

  • Provide guidance while empowering teams to drive the work and make decisions.
  • Leverage scenario analysis software for scenario planning to drive resiliency and adaptability in response to an ever-widening array of opportunities and risks, ensuring that the latest goals and OKRs remain relevant to the value your organization aspires to achieve.
  • Revisit prioritization on a regular cadence, publishing results and showing how decisions affected them.
  • Use rapid feedback loops and continuous assessment to ensure that teams navigate distractions and changes.

Teams and leaders will learn as they pivot and are able to successfully take advantage of new developments.

2. Invest in developing skills such as active listening, candid conversations, and critical thinking. Cross-functional teams that are collaborating and communicating frequently about the right topics are better able to assess which changes to adopt—and how quickly to adopt them. Teams and leaders must be able to hold each other accountable in healthy ways.

  • Create psychological safety in your team environments, so everyone can share their ideas without fear of being disregarded. Cross-functional teams can stall if people don’t feel heard and understood.
  • Hone skills in synthesizing information and thinking critically about what’s learned from fast feedback loops. In a product-led organization, the benefits are only seen when we consider the feedback and implications in the end-to-end value chain.
  • Develop skills in listening and critical thinking to help build systems-thinking and scenario-planning capabilities.

When leaders develop the ability to guide their teams to consider both the upstream and downstream impact of decisions, while avoiding getting stuck in too much analysis, teams can apply critical thinking to drive value.

3. Remove the barriers and nurture resilience by encouraging different approaches, honoring all feedback and publishing results as learning. Which barriers are the biggest obstacles to value? Which barriers drain the team’s energy? Are there ways of working we accept without questioning? Even when teams have a strong desire to collaborate for change, natural obstacles can exist in legacy structures, systems, and cultures.

  • Focus energy on quick wins first.
  • Take small steps to change little and often while celebrating all results to build trust, resilience, and energy for the most important work.
  • Remember the natural emotions that accompany change and learning while strengthening the team’s ability to move forward together. 
  • Harness the strength of design thinking not just for the products and services you are developing but also for your own teams’ ways of working. Consider defining different personas in your teams and functions, and consider how their capacity for change may influence the solutions you develop or the speed of change.

Leaders who model the ability to start small, fail, learn, and try again—especially in moments of ambiguity, chaos, and uncertainty—create strong, resilient teams that learn and realize value faster.

4. Foster teams’ ability to measure and manage their activities most productively. It’s hard to have the energy for creative problem-solving when the team is overutilized.

  • Establish goals in a range with a cap on time invested and a stretch goal that requires working smarter—not longer—to accomplish the results.
  • Think outside the box. Whether you’re new to OKRs and cascading goals or your firm uses them extensively, teams can get creative about what they measure and how they achieve it, even leveraging technology to gamify the new approaches and measures. 

When we see leaders treat time spent as a true investment and cultivate a sense of fun, teams are able to think more creatively to resolve issues and exceed goals.

Why is shift in culture and mindset as important as getting the product operating model right?

What’s different today is the speed at which we get new information and make trade-off decisions to operate most effectively. Just as many companies recognized that data-driven decisions were critical to their business, today’s leaders have had a similar recognition about culture and mindset. They know it’s an essential ingredient to run at the speed of a product-led organization.

Structure alone won’t help teams recognize information that’s relevant, especially when speed is critical. Ecosystems and the relationships within them are also evolving at faster rates than ever. Organizing to be able to share relevant information across the end-to-end value chain is about more than breaking down functional silos and investing in cross-functional teams. Leaders, teams, and individuals alike need to develop new capabilities, and leaders must provide guidance to build these capabilities across micro-cultures while empowering people to collaborate in very different ways.

How can you recognize where culture impacts transformation to ensure that strategies are effective and teams can co-design successful ways of working?

  • Empower teams by removing command-and-control mindsets and investing in capabilities to lead by example at every level, not just among senior executives.
  • Open communication channels between teams to respect and integrate the value from varying perspectives, and ensure the end-to-end value chain is considered when making decisions.
  • Identify touchpoints throughout your journey of changing “little and often” to recognize positive cultural shifts and integrate them into planning and execution.
  • Leverage principles of people-centered design and behavioral science to help people adapt to change at differing speeds.
  • Invest in many types of continuous training and learning, from critical thinking and communications to harnessing the power of data and digital tools.

Cultures that support continuous change and transformation don’t create themselves. Reflect on the elements of your own culture that made you successful up to this point, and co-design a new end-state with your teams at all levels. Guide teams—and leaders—to try these new ways of working, leaving room to evolve over time.