The Future is Now: Embracing Product Operating Models And Technology
Unlocking Revenue, Cutting Costs, and Driving Innovation through Customer-Centric Strategies and Cloud Technology
In today’s fast-moving digital world, businesses are constantly pushed to innovate, adapt, and meet the ever-evolving demands of their customers. To keep up, it’s clear that adopting a customer-centric culture and product operating model (POM) is essential. By putting the customer at the heart of your strategy and leveraging cloud technology and putting data into the hands of the right people and the right time to make better quality decisions, your company can unlock substantial benefits, from boosting revenue to slashing operational costs. Here’s why making the shift to a POM is a game-changer.
Why Go for a Product Operating Model?
Boosting Revenue
Let’s start with the bottom line. According to McKinsey, companies that focus on product-oriented strategies see a bump in profitability “our analysis shows that top companies in terms of product and operating model maturity have 60 percent greater total returns to shareholders than bottom-half companies and 16 percent higher operating margins” (McKinsey & Company). This means you’re not just throwing products out there—you’re tailoring them to what your customers actually want, leading to more successful launches and sustained growth.
Cutting Costs
Efficiency is the name of the game. Bain & Company highlights that organisations using cloud, linking connections between cloud services, faster product design, and better customer experience can see benefits in cost savings and higher productivty (Bain). By streamlining processes and optimising resource use, you save money and can invest those savings back into innovation and development.
The Heart of POM: Customer-Centricity
Making Customers Happier
A customer-focused approach is at the core of a successful POM. Bakkah’s research shows that a customer-centric product operating model can boost customer satisfaction (Bakkah). Happy customers are loyal customers, and they’ll spread the word about your brand. Referred customers generally have a higher CLV. Research from the Wharton School indicates that referred customers have a higher profit margin and are more likely to make another purchase compared to non-referred customers (Referral Rock). This extended customer lifecycle and increased purchasing frequency contribute to a more substantial overall value.
Driving Innovation
Innovation is crucial for staying relevant. McKinsey reports that adopting modern product management and engineering practices within a POM can increase innovation output, “improve customer and employee experience, decrease time to market by up to three times, reduce product defects by 50 to 70 percent” (McKinsey & Company). By fostering a culture of continuous improvement and leveraging the latest technologies, you can consistently deliver cutting-edge products and services.
Leveraging the Cloud
Flexibility and Agility
The cloud offers unmatched flexibility and agility, essential for a successful POM. According to Deloitte Insights, a cloud operating model can break down silos, streamline processes, and increase delivery speed (Deloitte). This adaptability is crucial for responding to customer needs in real-time.
Making Smarter Decisions
The cloud also supports better data-driven decision-making. With real-time analytics and comprehensive data insights, your organisation can make informed decisions that drive product success (Bakkah). This ensures you’re not just meeting current demands but also anticipating future trends.
Conclusion
Switching to a product operating model goes beyond just integrating new technology—it's about fundamentally transforming how a company operates and engages with both customers and internal teams. To truly embrace this model, companies need to foster a culture that prioritises customer-centricity and continuous improvement. This involves regularly engaging with customers to understand their needs and using this feedback to drive product development. Internally, it's crucial to view teams as both products and customers, encouraging a long-term, value-driven mindset where each team is accountable for delivering high-quality outcomes to their internal stakeholders.
Strong governance and clear mechanisms are essential for ensuring alignment with strategic goals. Establishing clear roles, responsibilities, and accountability frameworks helps in creating a cohesive environment where everyone is working towards the same objectives. Implementing regular reviews and transparent communication channels keeps everyone on track and aligned with the company's vision.
You can’t apply this to a function, you whole company needs to change from the top to the front line. You need to connect people and be transparent, connected and actively redesign your organisational flow by removing silo’s and incentivising people to innovate together, being accountable for their decisions, and having the data to make those decisions.