Have you heard? My new book Continuous Discovery Habits is now available. Get the product trio's guide to a structured and sustainable approach to continuous discovery. Many companies are either starting on or in the midst of an organizational transformation. Their goal is to adopt the product operating model (as described in Marty Cagan’s book Transformed) or something akin to it.
Much of this is being fueled by the success of the FAANG companies (Facebook, Amazon, Apple, Netflix, and Google) who, now along with Microsoft and NVIDIA, boast some of the largest market caps in the world.
These organizational transformations are being pushed by management consulting firms. The argument is that if you act like the big tech companies, you too can get results like the big tech companies.
But sadly, it’s not that simple. Organizational change is hard. Too many of these transformations are getting bogged down, taking years, and showing little results.
Product Talk (through our training business) and Hope Gurion’s Fearless Product (through her leadership coaching program) are often brought in to help with these transformations. And we’ve gotten a front-row seat to what has worked, what doesn’t work, and where organizations tend to get stuck.
Today, Hope Gurion and I are kicking off a new series where we discuss the challenges that arise during organizational transformations. Our goal is to help guide organizations throughout the process.
In our first short video, Hope and I discuss how to evaluate if your organization is ready to kick off a transformation. While we do believe that any organization can benefit from the product operating model, we have seen firsthand what happens when a company dives in before they are ready. It isn’t pretty.
You can watch the video of our discussion or read the lightly edited transcript below.
Full Transcript
Teresa Torres: Welcome everybody. I’m here with Hope Gurion and we are discussing how an organization can determine if they’re ready to do a digital transformation around the product operating model.
It’s a little bit of jargon. If you’re familiar with Marty Cagan’s Transformed, he writes about teams moving to more of a product mindset. He calls it a product operating model.
If you’re familiar with my work, it’s really looking at moving to product trios, adopting the discovery habits, being outcome focused. So how do we know if an organization is ready to make this change?
And Hope, after talking to many, many leaders about these types of changes—and we’ve both worked with dozens of companies—we’ve seen a lot of variation in the success of their transformations.
I think you’ve settled on a nice, simple framework for evaluating what needs to be in place to indicate you’re ready to change.
And before we get into this, I want to caveat it with—there’s lots of qualifications we could talk about. I think we’re gonna talk about two things that just indicate you’re ready to get started, but there’s much more you might have to do after these two things are in place.
Hope, do you want to give an overview of what those two things are? What do you look for when you’re talking to a leader about whether they’re ready to change?
Hope Gurion: Yeah, there’s two things and that will tell you if you’re even at the starting line. The first is: You have to have doubt that the way you have been making product decisions, deciding what to build, how to allocate resources, is not as effective as the other way it could be.
To be ready for organizational change, you have to have doubt that the way you have been making product decisions, deciding what to build, and allocating resources is not as effective as it could be. – Tweet This
So you have to know both of those things. You have to have doubt and an understanding of why you’re doubtful and that there is a more promising way of making those decisions.
Teresa Torres: I think you’ve talked about this as, there’s a belief that what we’re doing today isn’t going to drive success in the future. And that could come from—you read a book, you heard an interesting talk, you talked to a peer at another company. There’s something that created this seed of doubt of the way that we’re building our products today may not successfully carry us into the future.
Hope Gurion: That’s the first. Combined with that knowledge is pain in the status quo. That there really has to be something that is causing you to say, “We need to move from the way that we’ve been doing things to what I believe is a more effective way.” And that pain could come in many shapes, sizes, and forms.
Teresa Torres: Yeah, I love the way that you describe this is that there has to be literal pain because I think it’s really easy for us to get inspired. We’re inspired to work this new way, but then what carries us through the hard work of change is we’re running away from this pain over here.
Okay, so two requirements: We have to have a belief that we have to change the way that we’re working to have continued success and we have to have pain that keeps us focused on the change we’re driving.
Two requirements for org change: We have to have a belief that we have to change the way that we’re working to have continued success and we have to have pain that keeps us focused on the change we’re driving. – Tweet This
Let’s talk through some examples of each of these. First of all, who is it in the company that has to have both these things?
Why Organizational Change Has to Come from the Top—And Where the Inspiration Can Come from
Hope Gurion: It’s got to be the CEO. It’s got to be right at the top. If they’re not feeling that pain and they don’t have that comparison between what we do today and other ways we could be operating, if they don’t have those things, you’re not at the starting line.
Teresa Torres: We’re talking about organizational transformations. So it’s a whole company transforming to the product operating model. Marty wrote this in his book, Transformed. It’s simply not going to happen if the CEO isn’t driving the change.
And Hope, it sounds like you’re saying, they can’t just drive the change. These two things need to exist.
So let’s dive into the first one. What are some examples of how a CEO starts to recognize that the way their company is operating isn’t going to get them to success in the future?
Hope Gurion: You already called out a couple of the ways that they can get to this recognition. And prior to Marty’s book, Transformed, it would be one of these other ways. They might have read Transformed. I would say that is probably the primary target audience for the Transformed book.
They could have heard about it—CEOs meet with other CEOs. And so they could have heard about it from a peer, somebody they admire, somebody they respect—they respect the company and the way that they’ve been making their decisions. It could be that they heard an inspiring talk or maybe at a conference, but I think it’s more likely that they’ve heard from a board member or an investor or somebody that the CEO considers to be influential. They could have heard it from a member of their executive team, from their leadership team. So there are credible sources of this information, but I think it needs to come from a credible source for them to pay attention if this is not knowledge they previously had.
Teresa Torres: We can give a shout out to Collaborative Gain. They could have heard it from their Collaborative Gain Council of their CEO peers.
I know another common one is they could have just hired a Chief Product Officer, a VP of Product, that sort of introduced them to this way of working, and they have a leader on board to help drive the change. Do you want to comment on that?
Hope Gurion: Well, I think a CEO who’s not aware of the other ways of operating is unlikely to hire a Chief Product Officer who knows the way of working.
Teresa Torres: Yeah, although I have seen it happen a couple of times.
Hope Gurion: They might learn about it through the interview process, the hiring process.
Teresa Torres: Exactly. Yeah, it’s true. Most leaders that have those skills wouldn’t work for a CEO who wasn’t at least open to it at some point. Very good point.
Okay, so then let’s dig into the second one. So we’ve got a CEO, they’ve learned about this new way of working. Maybe they read Transformed. Maybe they have a peer who’s put it into practice in their own organization. They’re convinced it’s the future. Why isn’t this enough?
Hope Gurion: The reason it’s not enough is because old habits die hard. People have gotten to the place where they are—and if we’re talking about the CEO, that person has gotten to their place—by really relying on their ability to make good choices. And they have a whole history of probably more right choices than wrong choices.
And so if they don’t actually feel pain in the current moment, they’re going to fall back to what they feel like they’re experts in or more comfortable with, or—as you pointed out—you really have to have a lot of sustained commitment to get to the other side of this. And when things get hard—which they will—if you’re not running away from something, it is hard to sustain your motivation to get to the other side of it.
When things get hard with transformation—which they will—if you’re not running away from something painful, it is hard to sustain your motivation to get to the other side of it. – Tweet This
And so you need to have that pain. I don’t want to go back to that. It wasn’t going to create success. And there’s many forms of that pain that we can talk about.
Teresa Torres: Yeah, and before we get into that, I want to emphasize why I think the pain is so important. I think we’ve seen a lot of examples where a leader was genuinely excited about the product operating model, but the change didn’t stick. And it’s because change is hard. There’s a lot of work involved. Your whole culture is changing effectively.
And I’ll share one story. I was talking to a company recently. They’re still growing. They have something like 90 plus percent of their market. Things are working really well. I think their product leader read my book and was like, wow, I want my teams to work this way. And that was their why. There was not more to it than that. It’s not enough, right? There’s no pain that’s going to get you through that change management process.
And then I know you’ve worked with another company, similar idea, a C-level executive in charge of the change, giant organization. What’s sustaining that motivation throughout the giant organization day in and day out?
How to Sustain Motivation to Make Change in the Long Term
Hope Gurion: And it has to be really part of the shared consciousness because even if the CEO feels the pain, they have to be able to be specific because it’s easy for anybody influential in that organization to want to fall back to what they know, what they’re comfortable with. And so there has to be this sort of collective consciousness around why that pain isn’t something that can continue. And so the CEO kind of carries that torch forward because other people need to feel that collective pain.
Teresa Torres: Let’s dig into what are some examples of pain that an organization might feel that is adequate to drive this type of change.
Hope Gurion: This is not an exhaustive list, but here’s a few that seem to have more likelihood of sustaining a change. So if you have one of these, you’re more likely to be at the starting line.
One is that you are losing market share. Big motivating why. Big pain in the status quo. It could even be perceived loss of market share. It may not be actual lost market share. It could be a competitor growing at a rapid pace, starting to cause your win rate to go down or starting your churn rate to go up.
Another is just lack of achievement of your financial results. Usually that’s also because of losing market share, but not necessarily. You could have just had really ambitious plans that didn’t come to fruition.
Another motivating pain is significant employee attrition, especially in the product/design/engineering organization of people who know there is better and want to create better for their customers, for their experiences.
Those are some of the big ones.
There’s also—if you have a critical mass of leaders in your executive team who have worked another way, you could have the pain of, we all know better, why are we doing it this way? And that can create pain for the CEO.
Teresa Torres: So just to clarify, the pain has to be felt by the CEO. It’s not just pain in the organization, because we do see a lot of pain in organizations, whether that’s role conflict or less empowered teams. It’s not enough. We can’t just say, “Our teams are unhappy. We need to change.” The CEO has to feel the pain themselves. Say more about why that is.
Pain in the organization is not enough to drive change. We can’t just say, ‘Our teams are unhappy. We need to change.’ The CEO has to feel the pain themselves. – Tweet This
Hope Gurion: For the very reason that if the CEO isn’t personally feeling that pain, that’s not going to sustain the amount of attention, support, investment required to change the hearts and minds of so many people in the organization that are going to want to stick to the status quo.
How Product Leaders Can Get CEOs Bought into Organizational Change
Teresa Torres: Okay, so I’ve heard the CEO, starting with the CEO, has to be aware of this new way of working and believe the way that they’re working today is not going to lead to success in the future. That’s our first criteria.
Our second criteria is the CEO has to feel pain that’s going to motivate the change over time to get to this new way of working.
So what if I’m the CEO of a company and I’m not feeling pain… do I not need to change?
Hope Gurion: If you are in the product org or leading a function in the product/tech/design org and your CEO doesn’t feel that pain, I think it’s going to be a harder effort to transform. I don’t think it’s impossible. I just think it’s much harder.
You really want the CEO to be able to be the champion, the supporter, the reminder, the reinforcer of why we need to let go of and unlearn the ways that we previously did things, made decisions in order for new and improved ways of working that actually deliver on the things the CEO cares about, financial results, market share regaining, less customer churn, less employee attrition, the things that that person is being evaluated on as whether or not they are an effective leader of the company.
To drive change, you really want the CEO to be able to be the champion, the supporter, the reminder, the reinforcer of why we need to let go of and unlearn the ways that we previously did things. – Tweet This
Teresa Torres: What I really love about this sort of two-pronged model is if I’m a Chief Product Officer or a VP of product, and my CEO doesn’t see these two things, doesn’t feel these things, I almost have a roadmap of how I can help get my CEO there.
Can I introduce my CEO to this new way of working and create doubt that our current way of working isn’t going to get us in the future? And can I start to expose some of the pain that does exist in our organization in a way that hits at the CEO level?
I guess we can conclude not all organizations are ready to change, but it’s probably true that most organizations, if not all organizations, have the potential for both of these things to be true. Would you say that’s fair?
Hope Gurion: I think that’s fair. I think you’re right. It may not be showing up yet maybe in the financial results, but is there a graveyard of launched products that didn’t produce any financial results? Is there a graveyard of a lot of waste that occurred? Are there other leading indicators of future financial, less than desired results that can start to expose the approaching pain that the company might be facing, that they could be proactive and address if they were willing to learn about other ways of making decisions that increase value in much less time and effort and more alignment?
Teresa Torres: I think we’ve certainly seen plenty of successful companies that don’t work this way. If you’re a leader in one of those organizations and you’re trying to get them to work this way, I think the lever to push on is how long will you continue to be a successful company when your competitors are starting to work this way, when new upstarts might be starting to work this way.
Hope Gurion: I think that’s the way to approach it.
Teresa Torres: All right, well thank you Hope, this has been very insightful and we’ll continue in a future video and get into who is driving the change, who all the different characters are, how to get alignment, and much more, so stay tuned.
If you are a product leader at an organization that is bogged down in a transformation, get in touch. We can help.
