In today’s rapidly evolving business landscape, traditional operating models are struggling to keep pace with the needs of digital-first enterprises.
The shift toward product-led operating models (PLOM) has also become a strategic priority for many companies seeking to innovate faster, deliver superior customer experiences, and maintain a competitive edge. But what does a product-led operating model really entail? How does it differ from conventional models, and why should companies adopt it?
This is the first blog in our series on product-and-platform led operating model transition. We aim to cover several dimensions on PLOM, including organizational design, processes, tools and technology and talent in the coming blogs.
This blog explores the essence of the product-led operating model, its impact on organizations, the challenges of adopting it, and the benefits it can deliver. Now, let’s dive deep into the principles, enablers, and outcomes of a product-led transformation…
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The dawn of the product-led era: More than just a buzzword:
A product-led operating model structures the organization around products rather than projects. Each product—whether a service or software application—is treated as its own mini-business unit. Unlike the traditional project-based approach, PLOM is focused on long-term value creation, with dedicated teams responsible for each product’s lifecycle. This fosters accountability, continuous improvement, and faster innovation.
*Based on Everest Group’s survey of 200 global enterprises with revenue more than US$ 1 billion
The 4 core tenets of a product-led operating model are:
- Decentralized information technology (IT) teams: IT is integrated into business units, allowing teams to work closely with stakeholders and understand the business context deeply
- High autonomy: Teams are granted ownership over products, driving accountability and more meaningful outcomes for the business
- Shift from milestones to objectives: The focus is on achieving business objectives, not merely meeting project milestones. This allows for iterative development and continuous delivery of value
- Prioritize speed over perfection: Teams prioritize agility and responsiveness over lengthy perfectionism, speeding up time-to-market for products
Why your current operating model might be holding you back?:
The traditional project-led approach, with its rigid timelines, fixed budgets, and siloed teams, is increasingly becoming a liability in today’s fast-paced digital landscape. Here’s why:
- Slow time-to-market: In an age where first-mover advantage can make or break businesses, the lengthy approval processes and waterfall methodologies of project-led models are detrimental
- Disconnect from customer needs: Project-led approaches often prioritize internal metrics over customer satisfaction, leading to products that miss the mark
- Innovation bottlenecks: With resources tied up in predefined projects, there’s little room for experimentation and pivoting based on market feedback
- Talent drain: Top talent is increasingly drawn to environments that offer autonomy and end-to-end ownership – something project-led models struggle to provide
*Based on Everest Group’s survey of 200 global enterprises with revenue more than US$ 1 billion
The product-led advantage: More than just faster delivery:
While speed is a significant benefit of PLOM, its advantages extend far beyond just getting products to market faster:
- Enhanced customer loyalty: By continuously iterating based on customer feedback, product-led organizations create solutions that truly resonate with users, fostering long-term loyalty
- Increased innovation: The autonomy granted to product teams creates a fertile ground for breakthrough ideas and disruptive solutions
- Better resource utilization: Resources are allocated based on product performance and potential, ensuring optimal use of both human and financial capital
- Improved employee satisfaction: The sense of ownership and impact fostered by PLOM leads to higher employee engagement and retention
Case in point: Spotify – Harmonizing innovation at scale:
Spotify’s famous Squad model is often cited as a prime example of PLOM in action. By organizing into small, cross-functional teams (Squads) focused on specific product areas, it has maintained its innovative edge despite rapid growth.
Spotify’s model demonstrates how PLOM can be scaled effectively in large organizations, maintaining agility without sacrificing coordination.
Key Enablers of a Product-Led Operating Model:
To successfully transition to a product-led model, companies must enable several foundational elements:
- Leadership commitment
Top-down leadership is essential for driving the shift to a product-led mindset. Chief Information Officers (CIOs) must evolve into Chief Influence Officers, ensuring that technological decisions align with broader business objectives. Product-centric IT governance should also integrate strategic business priorities into product development.
- Agile and DevOps practices
PLOM requires an agile environment with continuous integration and continuous deployment (continuous integration (CI)/continuous delivery (CD)) capabilities. DevOps practices are essential for ensuring that new features can be tested, rolled out, and reverted back to quickly if necessary.
- Effective use of data and feedback
Data plays a critical role in driving product decisions. Tools for clickstream analysis, user feedback, and feature performance helps teams understand how products are being used and where improvements are needed.
Metrics and KPIs: The Move from SLA to OKRs:
A significant shift in a product-led model is the way success is measured. The traditional model focuses on service level agreements (SLAs) and key performance indicators (KPIs), while PLOM focuses on objectives and key results (OKRs). OKRs are ambitious, outcome-driven goals, that align with long-term business objectives rather than operational metrics.
For example:
- OKR: Increase active user base by 15% over the next quarter by enhancing product user experience (UX).
- KPI: Did we meet our objective of reducing the churn rate by 5%?
This shift from operational to business-centric metrics encourages teams to align their activities with broader business goals.
Key challenges in adopting PLOM:
- Cultural shift: A product-centric IT model requires a change in mindset, moving from a ’defect-avoidance’ culture to a ‘fail-fast, learn-fast’ approach. Organizations need to instill trust, ownership, and collaboration across teams, fostering a ’generative’ culture where experimentation is encouraged
- Structural complexity: PLOM often introduces a matrix organizational structure, where IT and business functions operate closely. This setup can be complex, especially for larger enterprises that previously functioned in silos. For instance, defining decision rights—whether it’s feature sets, budget allocation, or vendor selection—can lead to friction between IT and business leaders
- Governance and scalability: While PLOM emphasizes autonomy, central IT functions such as cybersecurity, compliance, and architectural standards remain crucial. Managing this balance between decentralization and centralized governance can be difficult
Overcoming the hurdles: Transitioning to a product-led model:
While the benefits of PLOM are clear, the transition can be challenging. Here are some key considerations:
- Cultural transformation: Moving to a product-led model requires a significant shift in mindset across the organization. Leaders must champion a culture of experimentation, learning from failure, and customer obsession
- Talent and skill gap: PLOM demands a different skill set, particularly in product management and data analytics. Organizations need to invest heavily in upskilling and potentially bringing in new talent
- Technology infrastructure: Legacy systems can be a major roadblock. Investing in modern, flexible tech stacks is crucial for enabling the agility required in a product-led model
- Metrics and KPIs: Traditional project-based metrics won’t cut it. Organizations need to develop new ways of measuring success, focusing on customer value and business outcomes rather than just delivery timelines
- Governance and risk management: Balancing the need for autonomy with necessary oversight is crucial. Organizations must develop new governance models that enable speed without compromising on compliance and risk management
*Based on Everest Group’s survey of 200 global enterprises with revenue more than US$ 1 billion
The future is Product-Led: Are you ready?
As we move deeper into the digital age, the ability to rapidly innovate, adapt, and deliver customer value will be the defining factor between market leaders and laggards. The Product-Led Operating Model offers a proven framework for achieving this agility and customer-centricity.
However, the transition to PLOM is not a one-size-fits-all solution. Organizations must carefully assess their current state, culture, and goals to determine the right approach. It requires commitment from leadership, investment in people and technology, and a willingness to fundamentally rethink how value is created and delivered.
The question isn’t whether your organization should consider a product-led approach, but rather how quickly you can begin the transformation. In a world where customer expectations are constantly evolving, standing still is no longer an option.
The product-led revolution is here – will you lead, or be left behind?
In our next blog, we will explore in-depth the key dimensions of PLOM: organization design, processes, core technology and talent. We will discuss at length a framework that serves as a blueprint for establishing the foundational principles of a product-and-platform-led operating model and assists enterprises throughout their transformational journey.
If you found this blog interesting, check out our blogs page at Everest Group | Blog (everestgrp.com), which delves deeper into a wide range of topics across all of our service lines.
To discuss this topic in more detail or for an even more detailed analysis, please contact Krishna Zawar and Parul Trivedi.
