Many business-to-business services organizations are beginning to realize the accelerated growth potential of scalable, more productized business models. The opportunity to create higher customer value at a lower cost has led many organizations to make big moves to capitalize on the promise of a productized business model and evolve their culture to be more "product friendly." They are looking to change their cultures to enthusiastically support their offerings' diversification and prioritize building new scalable products that augment their existing portfolio of 1-to-1 services.
Many organizations start this cultural transformation by addressing their people; garnering "buy-in" from their leaders and employees to a new way of doing business; talking up the financial and competitive benefits of product innovation, and asking leaders to evangelize a more digitalized, scalable view of delivering value. They bet on the importance of "winning hearts and minds."
Many others start with operations; they redesign their org structures and operating models, put new incentives and budgets that promote scalable products, and invest in innovation hubs and product managers to ensure accountability for the evolution of a product friendly culture. These leaders believe "if you build it, they will come."
With either approach, people first or process first, most organizations fail.
They fail for a specific and preventable reason: When looking to change your organizational culture, it is critical to address people and processes simultaneously. Not people first, or process first - but both, and together.
Let's start with what we mean when we say culture:
- The most helpful definition is to think of culture as the set of behavioral norms and written and unwritten rules that shape the organizational environment and how individuals interact with and get work done in that environment.
- Put another way: culture is what people do when no one is looking.
- So a "product friendly culture" is one where leaders and employees naturally and without resistance steer into product innovation, think in terms of scalable products, and support - structurally and interpersonally - efforts to bring new, value-added products to market.
- Most organizations today do not have a "product friendly" culture. But many want one and invest heavily to get there.
People First Approach:
When leaders attempt to shift their cultures to become "product friendly" via the "people first" approach, they do some combination of the following:
- They try to change the people they already have by generating buy-in for a product friendly culture via training, internal PR campaigns, and leaders championing productization.
- Or they try to change the type of people they bring in. For example, they hire employees and leaders with product experience and onboard others with messaging around the importance of innovation and productization.
But this approach fails because even if employees and leaders know and believe in the importance of being a product friendly culture, too often, the organization's processes have not been set up to support those goals. Here's an example that has been repeated in reality too often:
A CEO with a vision for productization brings in a new VP of product. She is given a seat at the leadership table and asked to create a product friendly, innovation-forward capability within the business. Everyone at the company talks about the importance of scalable products, innovation, benefits to the enterprise, and the criticality of remaining competitive. There are posters on the wall and town halls with Q&A. But operations have stayed the same.
All those leaders at the table have the same incentives, objectives, and challenges they were wrestling with before our new VP of Product arrived. Employees that work under them have the same full plates they had before, and business as usual (and safe, stable, and precedented business at that) goes on.
Let's say that the CEO, knowing that employees and leaders are going to focus on their existing business, builds the new VP of Product her own product team or even an "innovation hub" - a team specifically tasked with creating and delivering new products. That can work sometimes, but too often fails because it is insufficiently integrated into the existing enterprise. Core organizational processes have stayed the same. The CEO has created a department that operates on "product island."
More often than not, it generates products that need to be sufficiently tied to the business or, more critically, because of the isolation, they miss or understand the urgent & expensive problems of customers.
So despite all the effort and experience of the new VP, without actual operational change, she will find her task Sisyphean. And she is the one individual in the organization who wants to productize. Imagine now the resistance of an employee whose professional value, the core of his career, is tied to delivering expertise in a one-to-one model. Who's incentives and performance are dependent on delivering against the traditional model of making money for the business. Leadership can shout from the mountaintop how critical productization is.
But absent real operational change, productization, to that employee, is dead on arrival.
The lesson to balance a people-focused approach when it comes to culture change? It has to be more accessible for people to do the behavior you want them to do than the behavior you don't.
Process First:
“Process first, then!” would seem to be the answer. Pull behavior through by making it easier to behave in a product-friendly way. Redraw the org structure to integrate innovation expectations and product relationships into the day-to-day. Change performance management and incentives to reward innovation. Set up “hack-a-thons” and build “innovation hours” into the week. This, too, is the proverbial path paved with good intentions. And it fails just as often as the “win hearts and minds” strategy.
When organizations try to embrace a product-friendly culture via process before people, they indeed encourage adherence to the right behaviors, but employees (and often leaders) don't understand the "why" behind it. If they don't understand the goals and believe in the potential of productization, they can't operationalize the culture change.
A good analogy is a golf swing (or tennis swing, or any other kind of swing) - it only works if the person swinging has followed through. And a purely operational approach creates leaders, and employees need help to follow through. When interviewed about making this kind of translation, employees often say, "You tell me I need to be innovative and customer-centric… What does that even mean? How do I know that my innovation will be valued by customers? I don't feel like this will work. Where do I focus? What am I supposed to do?"
To create a product friendly culture, leaders must evolve their business processes like budgets, staffing, organizational structure, and policy enforcement to prioritize a product friendly culture. Without bringing people along to understand the goals and vision for the future, the impact will be limited.
Important note: "Understanding" is not the same as "liking." Organizations do not have to create puppy dogs and sunshine feelings amongst employees towards changes required for productization. Leaders and employees - especially in B2B services organizations - are savvy, intelligent, and, as the saying goes, know which side their bread is buttered on.
The goal is not to tell career consultants that they never knew they always wanted to work in a product-friendly culture. Compelling data from Gartner, shown below, says that "liking" change is not critical for transformation success. "Getting it," however, is. Efforts to ensure employees see the personal benefits of a change don’t improve the probability of change success, however, if employees understand the goals of change, the probability of success substantially improves.
The lesson is to balance a process focus when it comes to implementing a product friendly culture. Employees don't have to like it; they have to "get it."
Efforts to evolve into a product friendly culture are tricky. If the focus on people is uncoupled from a focus on process, the likelihood of achieving material change will be low. But the ability to see both people (helping employees "get it") and process (making it easier to do the desired behavior) as inextricable and cooperative elements of cultural evolution will not only reduce risk; it has the potential to materially improve the ability for your organization to discover innovative, scalable, competitive products that are born and sustained in a product friendly culture.
Please schedule some time to learn more about how Vecteris can guide your organization on the journey to creating a more product friendly culture.