Product-led Challenges: Organization & Leadership
Start improvement by understanding your organizational and leadership context.
During our prep for our upcoming Product Management Today webinar, Dave and I engaged in a lively discussion about product organizations. As we dug deeper, it became clear that this subject might interest others in our field, so I’m summarizing that discussion here.
In this post, I’ll discuss the two kinds of product organizations I see in the business world. Each has its own set of variants and challenges, so I’ll also cover those.
The first I call “pure product companies.”. These are companies where the software they’re building is the product. When I say product, I mean, “This is the thing that makes the company money.” These companies have an organization inside of them called either product or product management. SaaS companies are a good example.
I call the second kind of company a “traditional product company.” Historically, these firms' primary focus and expertise lie in producing and managing physical products or services that are not inherently technology-driven. These companies have traditionally viewed tech as a supporting function, often treating it similarly to overhead departments like finance or HR rather than as a core component of their value proposition.
Pure Product Companies
In pure product companies, there’s usually a sub-organization called product management or simply “product.” In basic terms, the product management team brings everything together. It’s their job to conduct research, develop product strategies aligned to business strategies, prioritize outcomes, publish a roadmap, and cultivate strong relationships with customers and other internal groups. There’s even more to it than that. Product management is not an easy job.
These organizations might only have one product, but multiple products is the norm in larger organizations. Some products may satisfy customer needs, while others might enable employee efficiencies. It’s rare that a large organization focuses on a single persona, let alone a single market segment. Along with this scale comes a need to consolidate and organize teams and capabilities, which involves making some really gnarly choices around organizational design.
Like any other organization, a product organization has people operating at different levels. Typically, the organization has a Chief Product Officer as its most senior leader.
In my opinion, the CPO should report to the CEO, where product is a first-class consideration. However, this isn't always the case.
Sometimes, product management is organized under the technology or engineering group. This arrangement has some advantages–contributor roles such as product manager (PM) and engineer tend to be more aligned when they report to the same leadership. However, there are things about that arrangement that can also be problematic. Priority and decision-making might trend a little more technical at the expense of being market-forward. The balance tilts toward tech.
Other times, you'll see the product management organization organized under the CMO and the marketing group. You probably won’t have that technology issue I mentioned, but there are other potential caveats. Not all CMOs are strategic. Some are very quant-like and focused on developing marketing funnels. Others have a stronger relationship with sales and their peer Chief Revenue Officer, and sales-driven is rarely a good look for product success. And does that person come from a more corporate brand management background? They may not really understand how products exist in the market, coming from a focus on brand storytelling over centering on unmet customer needs.
I'm not trying to diss anyone. We all have different strengths and weaknesses; however, I am saying that the CPO plays a very important role. I see the CPO as a shepherd of strategies where all these different and necessary viewpoints come together. They must be in the boardroom and influential at the C-table to do their job.
When I work with these companies, I mostly work through these issues with the CPO. A common problem we might work on is engaging more effectively with their peer team (CTO, CMO, CRO, etc.). Getting there, we can cascade those collaboration patterns to other layers of the organization, ultimately with contributor product engineering teams.
Traditional Product Companies
Automotive, financial, insurance, and food/agriculture companies have been building products well before the term “digital product” was coined. In such organizations, product development and management often follow a program- or project-based approach, where business leaders define the scope, time, and budget for initiatives and then pass requirements to the IT department for execution.
This model sometimes lacks a strong product management capability, resulting in fragmented communication, limited collaboration between business and technology teams, and challenges in responsiveness to market changes (literal agility). These mismatches manifest as adversarial relationships between business and IT.
As technology becomes increasingly integral to differentiating their offerings and generating revenue, these companies are beginning to recognize the need for a more structured and integrated product management approach. This shift involves building a product management capability, fostering collaboration across business and technical teams, and developing the necessary skills and disciplines to manage digital products in harmony with their traditional offerings effectively.
In their early stages of maturity, product management groups in traditional firms tend to act like organizational “middle children,” resolving arguments and buffering hostility between their business and IT siblings. I think this is largely a symptom of the business viewing IT as an overhead expense instead of treating tech and product as a potential differentiator and revenue generator.
We're starting to see those things start coming together more. However, what's really still lacking is the capability of product management. Typically, business leaders don't have time to be in the market and to do things to collaborate with engineering and other stakeholders. These leaders aren't always at the table, so may lack a good overall picture of what's happening. So instead, they act like ping-pong balls, trying to pass orders back and forth. It's not effective for anyone. It's a really difficult situation.
At Nerd/Noir, building these skill sets is probably the biggest way we help traditional product organizations. Our first steps usually involve getting past the project management default and developing core PM skills like product strategy, storytelling, and community building. We’ve found success approaching product teams as cross-disciplinary groups involving business, product, and engineering. Moves like this nudge traditional organizations toward the promised benefit of pure product organization.
So What?
Understanding the differences and similarities between pure product companies and traditional product companies is the right starting point for improvement.
Pure product companies integrate technology as a core component of their value proposition, with product management playing a pivotal role in aligning strategies, fostering innovation, and driving market success. However, the effectiveness of product management can vary based on its organizational placement, influencing how market-oriented and technically balanced the company can be.
On the other hand, traditional product companies are transitioning toward recognizing the importance of technology and structured product management. As they evolve, fostering collaboration across business and technical teams and building robust product management capabilities become essential steps.
Despite these differences, both types of organizations have some shared needs. They both require leadership with a strong voice. They must invest in developing their staff because product management is complex. More than anything, they share the same goal of creating products that resonate with the market, deliver exceptional value, and return profit to their businesses.