Product Operating Model Marty Cagan

Transformation Fail

The Root Causes of Failed Transformations

It is an open secret that the vast majority of attempted digital transformations fail.  Companies spend millions of dollars and years of effort, yet fail to make meaningful change.  The only real question is why?

We have been working for the past 20 years on the front lines to help companies that are serious about transforming to realize the benefits of moving to the product operating model.  Not all have been successful, but many have, and at this point we have strong opinions about what is necessary to successfully transform.

In this article, we’ll discuss what we consider the top 10 root causes of failed transformations.  Success starts with confronting these confusions and misunderstandings head-on.

We hope to give you a better understanding of why so many transformations fail, but also a deeper understanding of what is truly necessary to succeed.

1. Underestimating Scope 

It is very common for companies to believe that transformation is something that happens within the technology organization.  This is especially common when the company also thinks that transformation essentially means implementing Agile.  But as you’ll soon see, transformation impacts the entire organization – sales, marketing, finance, HR, legal, compliance and more.

2. Underestimating Role of CEO 

As mentioned earlier, transformation impacts the company far beyond the technology organization.  Too often, the CEO delegates the responsibility for transformation to a CIO, Chief Digital Officer, or Chief Transformation Officer.  But as Bill Campbell famously said, “the company cares about what the leader cares about.”  Which is why a successful transformation depends on the CEO being the “chief evangelist” of the company’s move to the product operating model.

3. Underestimating Role of Technology 

So many companies draw these artificial lines around what they consider physical products and what they consider digital products.  But the potential of technology is to improve all products, not just digital products.  More generally, it’s important to start thinking of technology as more than a necessary expense.  Moving to the product operating model is about turning technology from a cost center to a profit center.

4. Underestimating the Critical Competencies

It is easy to give employees a new job title, but much harder to change how they think and behave.  And sometimes that new job title carries along with it expectations that existing staff may not be able to perform.  This problem is most common with product managers, but is also common with product designers and engineering tech leads.  Good products come from strong product teams, and strong product teams are made up of skilled people in these critical roles.  Without strong people on the product teams, the product operating model collapses.

5. Misunderstanding Role of Engineering 

It is remarkable how differently engineers are viewed at a product operating model company versus at other companies.  In many old companies this thinking is so ingrained that they follow this to the logical conclusion and they outsource their engineers, considering them a commodity.  Yet nothing could be further from the truth.  At strong product companies, engineers play a critical role in identifying the best opportunities and the best solutions.

6. Misunderstanding Nature of Product

There are some fundamental differences between technology-powered products and services, and other types of products.  Steve Jobs used to refer to “the disease of thinking that an idea is 90% of the work” yet with technology the idea is just the beginning, and we understand that many (most) ideas will not deliver the hoped-for value.  Knowing what you can’t know is essential when working with technology-powered products, and this leads to an experimentation culture where we seek to quickly identify a solution that works.

7. The Product Leadership Gap 

If the product operating model depends on strong product teams, who is it that coaches the people on the product teams to ensure they are capable of performing their critical roles, and then have the context to make good decisions?  In so many companies trying to transform, this critical responsibility is either ignored or delegated to others.  Yet in strong product companies, this is the primary responsibility of the product leaders.  

8. Peanut Butter Product Strategy 

To succeed, your business needs to be sure you are pursuing the most impactful opportunities, and responding to the most serious threats.  Yet in most companies they simply allocate resources to the many stakeholders across the company in what is known as the “peanut butter product strategy” (spreading the companies resources thinly across the company).  Instead, the company needs an inspiring product vision and a holistic, insight-driven product strategy.

9. Prioritizing Predictability Over Outcomes

Every company ideally wants both predictability (so they can know what is happening when) and outcomes (achieving the necessary business results).  Yet most companies do not understand the relationship between the two.  Strong product companies understand the difference between time-to-market and time-to-money.  Time-to-market is of course important, but not nearly as important as achieving the necessary business results.  In so many old companies, the technology teams do not feel empowered to achieve business outcomes, so the best they can sign up for is to deliver output.  But in a product company, predictably delivering output that does not provide the necessary business results is an empty victory.

10. Looking For Love In All The Wrong Places 

You are probably wondering how could so many companies be making so many fundamental mistakes?  In most cases, the reasons companies made these mistakes is because they looked for guidance from people that had never actually built products.  As surprising as this sounds, we see this problem across the industry.  This is most often the management consultancies, or the Agile coaching community.  But as with most things, it is buyer beware.  You need to be sure the people guiding you have truly been there and done that, and that they know what good looks like.  As a very explicit example, you need to make sure the people teaching your product managers have actually done product management at a product operating model company.

Moving to the product operating model means successfully navigating each of these issues.  It’s not easy, but hopefully you have a sense of what to look out for, and where you need to get to.