Michael Bertha

3 ways to avoid traffic on the road to product-based IT

May 31, 2022
Business IT AlignmentIT Strategy

Shifting to a product operating model is a major cultural and operational change – but it’s worth the effort.

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In the endless need for speed, digital leaders continue their shift from project to product orientation. However, this shift is not a “set it and forget it” initiative. It requires nurturing and continuous evolution that often leads CIOs to wonder: is our team doing this because it’s trendy, or are we in this to drive meaningful change? 

Defining and rolling out a product operating model is just the beginning of a long road wrought with blind turns and detours. And your ability to drive meaningful change will ultimately hinge on your ability to navigate three realities once the table is set.

Reality 1: You don’t have (many) product owners in IT

Successful product owners have a unique combination of business acumen, technical know-how, and leadership skills. An absence of maturity in any one of these traits can spawn an existential crisis for product-based IT. In our conversations with CIOs, one of the most common things we hear is that there aren’t enough qualified product owners.

Many organizations have spun up product management bootcamps or “digital academies” to buck the trend and equip their teams with the tools they need to be successful product owners. Amir Arooni, EVP and CIO at $13 billion Discover Financial Services, launched a technology academy to give his engineers a more diverse skillset and to curb the view “that developers are like workers on a production line that churn out code, rather than creative problem-solvers who can help innovate.” This training program coupled with a product orientation in IT is paying dividends: a recent mobile pilot resulted in a productivity increase of almost a third with no increase in headcount. 

Other organizations may choose to source product owners directly from business units and functions, combining them with IT counterparts in a cohesive unit that breaks down the perceived wall between business and IT.

Whether you pursue a product management bootcamp, source product owners from business units, or pursue something entirely different, be prepared to invest in training to ensure new product teams have the skills to succeed.

Reality 2: Business units and functions must have their fingerprints on the model

Evolving your IT operating model in a vacuum, without bringing business units and functions into the fold, can create small wins, but it will ultimately fall short of the transformative outcomes you seek. For outsized returns in implementation, engage BUs and functions early and allow them to put their fingerprints on the following components of the operating model:

  • Vision. Articulate what it means to work in a product-based operating model and how it will help solve known business problems. The Chief Digital Officer at a healthcare client kicked off their organization’s shift by distributing a memo, co-authored by a BU President, to explain the vision in business language and describe how the new operating model would accelerate the work to integrate the people, process, and technology aspects of a recent merger.
  • Product taxonomy. Lay out a draft of what product teams you think will be needed to support current and emerging capabilities across the value chain, then quickly bring BU and functional leadership into the conversation for input. Make sure to pay homage to the nuances of products and processes so that you don’t alienate your BU and functional counterparts. For example, get BU feedback before assuming that the lead-to-cash process for multiple business units can be supported by a single product team. Share your rationale for your product taxonomy with your counterparts and negotiate an initial set of products that strikes the right balance of BU autonomy and scale. Revisit the taxonomy regularly to identify opportunities to combine or split out existing product teams, or spin up new product teams to support business model evolution. 
  • New ways of working. Shifts toward product-based IT are often tightly coupled with agile transformation efforts that introduce many new roles, responsibilities, and processes. If you want to rollout a new intake process, or you want BU participation in quarterly planning and backlog prioritization, let them help design the process. This gives them skin in the game and avoids the perception that the tail is wagging the dog. At the same time, know that things might not work perfectly right away. A tendency for functional directors to contact software engineers directly instead of going through the Product Owner, for example, may create severe capacity management issues for a company making the shift. Addressing those challenges quickly and directly is important to ensure all stakeholders are moving in the same direction.

Reality 3: An operating model shift requires finance to evolve with you

If the goal of shifting to product-based IT is to have autonomous and empowered product teams that pursue the highest-value opportunities, you can’t let finance slow you down with rubber-stamp processes. Digital leaders need to build a close partnership with finance to demonstrate the benefits of a product-based funding model for them and the organization at large.

In a recent conversation with Maya Leibman, EVP & CIO of American Airlines, she noted that traditional, project-based funding models “were designed to make you give up. There were so many mountains to climb, it had almost become a game of endurance.” She went on to say that prior to adopting product funding, many teams would use maintenance dollars for projects just to avoid the approval process. 

American Airlines’ new product-based funding model provides a persistent stream of funding and reduces unnecessary approvals. The boarding experience product team, for example, adds up the technology and process costs that go into maintaining and enhancing the boarding experience annually, then receives those funds to spend at their discretion to mature the experience. Not only did this improve speed and throughput, but it also provided finance more visibility into costs and new ways to prioritize investments. Ross Clanton, American Airlines’ Managing Director of Technology Transformation, highlighted a breakthrough that occurred in the finance department as a result of the new funding model: “They could see into the ‘black box’ of run costs now, not just the grow costs we submitted in the project-based model.”

Shifting to a product operating model is a major cultural and operational change. When implemented well and improved continuously, it can result in faster time to market, more innovation, and better customer experiences. But the road is not easy, and CIOs need to be ready to get their hands dirty. Accounting for the realities above in your plans can help you bypass many traffic jams on the road to product utopia. 

Michael Bertha

Michael Bertha is a Partner at Metis Strategy, a strategy and management consulting firm specializing in the intersection of business strategy and technology. Michael is the Head of the firm's Central Office, where he advises Fortune 500 CIOs and Digital executives on the role that technology plays in differentiating the customer experience, developing new products & services, unlocking new business models, and improving organizational operations. Prior to joining Metis Strategy, Michael spent 9 years in the IT Strategy practice at Deloitte Consulting, where he focused on working with senior leadership teams across several industries on strategic, IT-enabled business transformations. Michael has an MBA from Cornell University, and a master’s degree in the Management of IT from the University of Virginia.

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