The Product Operating Model: An Introduction

The Product Operating Model Defined

The product operating model, also referred to as the product model, is a conceptual model based on a set of first principles that leading product companies believe to be true about creating products.

The product operating model is about consistently creating technology-powered solutions that deliver value to customers and that also drive results for the business. It’s about achieving outcomes versus merely producing output.

What Does it Mean to Work in the Product Operating Model?

The 3 Dimensions of the Product Operating Model

How Products are Built

Companies that work in the product operating model build products using small, frequent, and reliable releases – usually at a minimum of once every 2 weeks, but ideally continuously (CI/CD).

Small, frequent releases enable companies to:

respond quickly to customer needs
detect problems, often before their customers do
prove that new capabilities deliver the necessary value

How Problems are Solved

Product teams working in the product model are assigned problems to solve and desired outcomes to achieve, instead of being given a list of features to build. This means that the people closest to the enabling technology and the users – the engineers, product managers, and designers – are able to decide on the best solution to solve the problem they’ve been assigned, and deliver the necessary outcomes.

Teams working in the product model are empowered and accountable for finding solutions that are:

valuable – the customer will buy or choose to use
usable – the user will be able to figure out how to use
feasible – the engineers know how to solve with the time, technology, data and skills on the team
viable – the solution will work for the business in terms of constraints in marketing, sales, finance, service, legal and compliance.

Deciding Which Problems to Solve

In companies that work in the product model, leaders in product management, technology, and design are responsible for deciding which problems to solve. The product leaders work with the stakeholders to drive the necessary changes across the organization by creating a:

Customer-Centric Product Vision – a strong, compelling product vision that is customer focused. The product vision describes the future that the company is trying to create.

Insight-Driven Product Strategy – identifies the most critical problems that need to be solved to deliver on the business and make progress towards the product vision.

The 5 Product Concepts of the Product Operating Model

Product Culture

An organization’s product culture is defined by how it utilizes its talent to create products. This includes how a company identifies and prioritizes opportunities, makes decisions, and delivers on its promises to customers and stakeholders.

There are 4 product principles central to product culture:

Principles over Process
Trust over Control
Innovation over Predictability
Learning over Failure

Product culture may look and feel different to each company, but the common thread for those working in the product operating model is that the culture emphasizes a focus on products and outcomes rather than projects and dates.

Product Strategy

Product Strategy is the plan to achieve the product vision, while satisfying the objectives of the business. It identifies the critical problems to be solved within a specific timeframe, usually quarterly. In the product operating model, the decisions about which problems to solve are usually made by the product leaders versus being distributed across the various stakeholders.

There are 4 product principles central to product strategy in the product model:

Focus – picking the most important goals to pursue that will make the biggest impact
Powered by Insights – formulating a product strategy depends on insights which come from a variety of sources including: data, customers, enabling technology, and industry
Transparency – product leaders clearly communicate to their teams and stakeholders on the data and reasoning behind product strategy decisions
Placing Bets – product leaders manage the portfolio of risks by placing a series of bets each quarter that maximize the likelihood of meeting the company’s annual business objectives

More on Product Strategy:

Product Teams

In the product operating model, cross-functional, durable teams are empowered to solve problems for their customers and create value for the business. See more about the members of product teams in Product Model Competencies below.

There are 4 product principles essential to product teams in the product model:

Empowerment – teams are given problems to solve and empowered with finding the best solution
Outcomes over Output – teams exist to solve problems for the customer and the business, not to ship features that might not achieve the desired outcome
Sense of Ownership – teams are responsible for and given ownership of something meaningful to the customer and the business
Collaboration – the cross-functional team – product managers, product designers, and engineers – work together to solve problems

Product Discovery

Product discovery is how product teams rapidly determine the best solution to the problems they’re trying to solve. Product discovery provides evidence that the solution is valuable, usable, feasible and viable, and that it will achieve the necessary outcomes.

There are 4 important product discovery principles:

Minimize waste – test ideas quickly to determine if a solution is worth building
Assess product risks – evaluate the value, usability, viability, and feasibility risks early in the process
Embrace rapid experimentation – use both quantitative and qualitative techniques to quickly create prototypes and run experiments
Test ideas responsibly – prototypes and experiments should be handled in ways that protect the company and its customers

Product Delivery

Product delivery is the process of building, testing and deploying a quality solution – one that is reliable, accurate, performant, scalable, and delivers the necessary outcomes.

The 4 essential product delivery principles for companies in the product model are:

Small, frequent, uncoupled releases
Instrumentation – products must be instrumented to determine how and if they are being used
Monitoring – strong monitoring is in place to quickly detect issues
Deployment Infrastructure – tools that enable A/B testing and other deployment practices are used

The Necessary Product Operating Model Competencies

In the product model, the product teams exist to solve problems for their customers and for their business. It’s essential that the product teams are staffed with the critical product competencies to succeed in the product model.

Product teams should be cross-functional, durable, informed by strategic context, empowered, and accountable for results. In most product teams, they are comprised of:

Product Managers – responsible for the value and viability of what the team builds and accountable for the outcomes
Product Designers – responsible for ensuring the usability of the product and accountable for the customer experience
Tech Leads – responsible for ensuring the feasibility of the solution and accountable for delivery
Product Leaders – managers and leaders of product management, product design, and engineering who are responsible for empowering the teams by providing necessary coaching and strategic context

Reasons Companies Decide to Work in the Product Model

Companies working in the product model are known for repeatedly building some of the most innovative products in the world that produce meaningful outcomes for both their customers and their business.

For organizations that have not worked in the product model, the effort to transform can be substantial – however, many are motivated to change by one or more factors:

Increased competitive threats – Disruptive innovation has occurred in virtually every industry causing companies to realize that old ways of working are not enabling them to compete with the tools and capabilities of their competitors.
Compelling rewards – The valuation of companies with demonstrable success using the product model to innovate on behalf of the customers provides significant incentive for companies to change.
Frustrated leaders – Leaders at companies that have poured substantial time and money into technology, yet haven’t produced the desired outcomes.