What can be described as an operating model for the creation and management of products and services

An operating model that outlines the key activities required to respond to demand and facilitate value realization through the creation and management of products and services. The activities represent the steps an organization takes in the creation of value. Each activity contributes to the value chain by transforming specific inputs into outputs.

These inputs could be demand from outside the value chain or the outputs of other activities. The activities are connected to and interact with one another, with each activity receiving and providing triggers for further actions to be taken.

To convert inputs into outputs, the value chain activities use different combinations of ITIL practices. Each activity may draw upon internal or third-party resources, processes, skills, and competencies from one or more practices.

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As companies scale, they can become more complex, resulting in higher costs and reduced speed and agility. Through scaling, functional silos emerge that can create operational boundaries and knowledge silos with more handoffs, reducing flow and quality. All these aspects work against each other, impeding the larger common goal of delivering value to customers and performing efficiently as a company.

A way to overcome this is to become product-driven and embrace a customer-focused product operating model. In this context, the term "product" includes platforms or services that deliver repeatable value to an internal or external customer. Lifting up the organization's strategic goals — supported by improving the transparency and interfaces so that everyone can see how they connect to delivering value — can unite the business with customers.

A product-driven company focuses beyond the transaction of a sale toward the longer-term customer relationship. Customer experience, insights and support are essential components of being product-driven. Such companies use data-driven feedback loops to pivot, learn, innovate and grow, and then regenerate value.

What Does A Product Operating Model Entail?

A product operating model is connected from the top and integrated into and across all functions and operations, centered around product teams delivering value for customers. Five key capabilities that are essential to develop and manage include:

• Actively Managed Product Strategy, Portfolio And Supporting Taxonomies

At the highest level, a board and product leadership team should have a clear and defined product and innovation strategy that is effectively communicated and managed. This should be focused on the longer-term view of how and where the company delivers value to specific customer segments in specific markets and what products need to be developed and maintained to retain these customers.

To support this strategy, a company must have a clear and actively managed product portfolio. This reveals insights related to the relevant linkages and performance lenses, highlighting relationships between different contributing and conflicting entities and capabilities. Moreover, the portfolio should provide insights across different markets and be supported by defined product life cycle stages. Each stage recognizes specific management needs, with the appropriate governance mechanism to enable products to perform and flourish. Relevant taxonomies must be in place so that performance can be identified within boundaries and explicit relationships can be attributed for total cost of ownership and resource planning.

• Managed Value Streams

Developing and delivering value through products and services can be very complex. As stated at the beginning of this article, breaking down silos is a key obstacle that a product-driven company should look to overcome. Even where products are clearly defined, the value streams can be mismanaged, resulting in hand-offs and silos. A product operating model should reveal, map and manage the entire value stream from ideation through to post-sale services and support to provide feedback into the innovation and improvement process. Dedicated owners should own and manage value streams—working closely with product teams, which reveal and facilitate the interconnection, interfaces and coordination of flow to maximize throughput, quality and agility.

• Customer Centricity

First and foremost, the culture across the organization should recognize and continuously seek to understand and respect its customers. A product operating model has mature capabilities in customer development, customer experience and product management practices. Each product team (internally and externally) can identify and target customer needs and problems directly and continuously measure and improve its customer satisfaction and performance. Custom centricity isn't confined to the products that are ultimately delivered to a paying customer but stretches across the entire organization.

• Stable And Dedicated Product Teams

A product operating model has shifted the culture from projects to products. This means that product teams are formed around the ownership of products and have small, stable, permanent teams that are accountable for them. Work is brought to the appropriate teams, and not teams to the work, as would be the case in a project organization. This is not to say that projects cease to exist, but the notions of project teams do. For example, coordination of an event like Black Friday sales is temporary, but all the dependent product teams are aligned toward the event and program.

These product teams are small, connected by interfaces and use common data points, allowing for diversity and divergence to flourish but with some cohesion to outcomes. Governance needs to be reinvented to allow for this and to support an environment for product teams to thrive — for example, turning a project management office into a product portfolio office.

• Transformation: Data Insights And Technology Enablement

To truly perform with an understanding of customer behaviors, product performance and interconnected value streams and to reveal innovation opportunities, real-time data and enablement platforms are required. A cohesive product and technology/cloud strategy can help deliver consistency and depth of capabilities and reduce time to value. Moreover, connecting the product strategy with the technology strategy can create more precise applications and insights to make significant advancements. Ultimately, investment in such capabilities can improve product performance and propensity to innovate and grow your business.

Can You Afford Not To Embrace A Product Operating Model?

Becoming product-driven can increase your ability to satisfy customers and drive long-term value, and it's becoming a necessary way to compete and grow businesses. According to research from Dimension Data, 92% of companies that improve customer experience see an uplift in customer loyalty, 84% see increased revenue, and 79% see cost savings.

As the cost of switching reduces and barriers to entry recede to the point where the smallest startups can outperform incumbents, a product operating model is a capability not just for growth but for survival by improving the chances for customer retention. The operational and cultural benefits of a product operating model can improve the insights and interconnectivity of your business for improved agility, cost reduction and innovation potential.

As more companies improve their products and services this way, businesses that become product-driven should be in the strongest position to survive in the short term and excel in the long term.

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