The Four Hallmarks of a Product Friendly Culture
Services Firms don’t need to become product-led organizations. They do need to become product friendly.
A CEO of a global human capital consulting firm recently shared that he lost almost 18 months of progress because executives and consultants did not buy into the organization’s new product strategy. Consultants and many executives at this organization didn’t believe that non-customized products could begin to adequately address their clients’ needs, and they weren’t willing to adopt new ways of working that would support product strategy. “I thought things would change as time went on,” this CEO told me, “but it became clear that that wasn’t going to happen on its own.”
At Vecteris, we repeatedly hear from clients that intentionally defining and adopting a different set of cultural norms is essential for moving a product strategy forward–and that not addressing culture at the outset can be costly and painful.
This CEO faced a significant cultural challenge: productization at this organization required embracing not only a new business model, but new behaviors, like collaboration, a test-and-learn mindset, and urgency, that was not part of the original culture. When the organization did begin to foster a more product-friendly culture, many senior employees chose to leave, rather than continue to contribute to the new business model.
In short, while this CEO had laid out a strong vision and strategic plan, he realized a half-step too late that the organization’s existing culture was preventing employees from embracing both. Coming from product-driven organizations, he had not anticipated the resistance to productization that existed in this consulting organization.
This is an example of the adage, “culture eats strategy for breakfast.”
To successfully productize, leaders need to understand the culture of their organization, and they need a clear plan for how to build a product-friendly culture. In contrast to product-centric or product-led cultures, a product-friendly culture aims not to abandon what makes services organizations successful but strives to teach the behaviors that make a product strategy flourish within a services firm. A product-friendly culture also goes beyond the attributes of innovation-friendly cultures by encouraging behaviors that are needed to innovate quickly by using technology–how most services firms are choosing to productize. Product-friendly behaviors also address the unique scenario that businesses face when transitioning from selling customized services 1:1 to selling standard, scalable products 1: many.
In this post, I describe the features of a product-friendly culture–what I am calling the Four Hallmarks of a Product Friendly Culture. When companies migrate the way they make money from selling time and expertise to meet the needs of an individual client to selling productized, scalable intellectual property that meets the needs of large market segments, they need to embrace and exhibit:
- Abundance thinking
A Product-Friendly Culture is Defined by Fearlessness
When I take a step back and think about why it’s so hard to do things like adopt a test-and-learn mindset (Discovery) or ditch a scarcity mindset (Abundance Thinking), or even to Collaborate, I see one emotion: fear.
In a recent conversation, I asked another CEO to describe the most important trait of a product-friendly culture. She stated: “The traits of a product-friendly culture indicate a willingness to face fear and embrace risk not as a threat, but as an opportunity.” Her comment supports recent research that suggests that individuals and organizations find more success when taking risks is a tacit part of how people work.
Fear is one of the most primitive human emotions–a natural response to risk–and it is essential to survival. Each of the four hallmarks of a product-friendly culture responds to a specific fear: of not knowing the answer, of not being perfect, of not having enough, and of no longer having the same personal value to the organization. Productizing itself can pose real risks to an organization, including career risks, financial loss to the company, and the psychological risk of being seen as the champion of a failed experiment.
These risks are heightened when the culture doesn’t support the product strategy. Cultivating Discovery, Speed, Abundance Thinking, and Collaboration can help redress the fears that accompany this business model transformation.
Discovery cultures are learning cultures, what Boris Groysberg et al, writing in Harvard Business Review, describes as “characterized by exploration, expansiveness, and creativity. Work environments are inventive and open-minded places where people spark new ideas and explore alternatives. Employees are united by curiosity; leaders emphasize innovation, knowledge, and adventure.” Discovery cultures develop and test hypotheses, make data-driven decisions, and view failure as an opportunity for learning, rather than as something to fear.
Most innovation cultures also value discovery: in a specifically product-friendly culture, discovery behaviors help fuel new product development and iteration. An organization that frequently tests new products or features, welcomes new product ideas sourced from across the organization and from target customers, values failure, and seeks out change is practicing discovery.
Product-friendly cultures have an interesting relationship with time. While it can take 3-5 years for services organizations to see a product strategy achieve profitability goals, they still need to value and act with urgency. Product-first competitors are often tooled for speed from the outset. And releasing products too slowly can also slow the rate of learning.
Valuing speed is a strong marker of a product-friendly culture, rather than just an innovation-friendly culture, because most productizing organizations are specifically using technology to standardize and scale their offerings. Many innovation cultures—like companies with long waterfall R&D stages— don’t need to iterate at the pace that bringing digital products to market requires. In contrast, product-friendly cultures show a willingness to compromise perfection for the sake of discovery–and thus, time to market. These organizations know that spending time designing every feature of a product without first getting rounds of customer feedback is less efficient and more costly than releasing a less-than-perfect beta that will continue to be built upon.
We often see perfectionism as a tacit behavior among professional services organizations, for good reason: these companies provide value to clients through highly polished, customized engagements. Services delivery employees can be reluctant to sell and deliver a less-than-perfect product because they fear that doing so puts their professional reputation with clients at risk.
Thankfully, the fear of not being perfect can be addressed by focusing on speed. Many productizing organizations describe how showing consistent, small wins to the services arm of the company can boost alignment with the strategy and grow the pace of sales.
Abundance thinking enables and supports many of the other behaviors associated with a product-friendly culture. When we adopt an abundance mindset, we get better at open-ended learning and discovery, collaboration across teams, and serving larger markets. Abundance thinking also helps productizing services firms recognize that productization doesn’t necessarily limit clients’ willingness or ability to grow their spending and that in fact, it is possible to sell both services and products to clients.
In contrast, for many services delivery staff, a scarcity mindset is the modus operandi: time and resources are by nature limited. Scarcity thinking can also feed the fear that new products will cannibalize revenue from existing, higher-priced services. There are, however, proven steps that reduce cannibalization risk. Product-friendly organizations are often demonstrating abundance thinking when they become willing to cannibalize existing revenue streams for greater revenue potential and customer reach.
Individual heroics are very common in service organizations where clients typically buy an individual’s expertise and may have a long-standing relationship with a single employee or a small team. But product-friendly cultures thrive in organizations that consistently collaborate, and especially across teams, with clients, and with other partners in the ecosystem.
Think, for example, about how a customer-centric co-creation product development process bakes customer feedback into new product development. Or how an organization might need to outsource much of the product work to partners outside the enterprise, like development partners, data providers, no-low code software providers, new distribution channels, or even acquisitions. Collaboration as a cultural value helps firms find and optimally work with this expanded network of partners.
Collaborating can feel threatening to employees who have built their careers demonstrating and selling their individual expertise. They have been consistently rewarded for individual heroics, and derive a strong sense of purpose and identity from these rewards–and they may even fear losing their position in this new environment. But research shows that when collaboration fails, it is because a desire to maintain personal status gets in the way of the respectful, experimental, learning mindset that characterizes strong collaboration.
Fear doesn’t have to be a nagging hurdle to organizational change. Vecteris has helped many organizations cultivate product-friendly behaviors through skill-building and strategies that make fearlessness a habit. Schedule a time to chat with Nicole Merrill, CEO (firstname.lastname@example.org) today.