Product vs. Functional Organization - a false dichotomy!

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There's a buzz going around that "we should move from functional organizations to product-led organizations." However, this binary perspective ignores the complexity of organizational design. The result of such a change is often a suboptimal, unsustainable system with a strong bias towards products, to the detriment of other things But I'm all for dissolving the classic functional organization model. And here's why.

Organizational Archetypes

Let us take a look at different organizational archetypes. You'll quickly realize that it's not as simple as a "product-led vs. function-led" organization - there are a myriad of possibilities. Before we dig into the details, let's briefly explain that an organization can emphasize different aspects, such as products, processes, or people, and each of these aspects can have a focus, a center, and a lead.

The focus is the organization's benchmark for success. The center defines the purpose of individuals and groups within the organization. The lead drives critical decisions.

Since in human systems, people think, do, and act - a focus means that there will be people paying specific attention to this, a center means that people's status in the organization is directly related to how close they are to the center, and a lead would be someone's primary responsibility.

But now, the heart of this article: the table with the different archetypes.

Emphasis	Focused	Centric	Led
Customer	Deliver high-quality products and services that meet the needs of customers.	Organize around delivering the best possible customer experience, and use customer feedback to inform decision-making.	Prioritize the needs and wants of customers above all else, and use customer feedback to drive decisions.
Data	Use data to achieve business goals. It emphasizes the importance of aligning data-driven solutions with business needs and objectives.	Organize around "what the data says," enhancing efforts that drive key indicators and reducing efforts without measurable impact.	Drive business decisions based on data insights, doing more of what's supported by data and less of what's disproven by data.
Function	Deliver high-quality specialized functional services that contribute in the creation of products and services that meet the needs of customers and stakeholders.	Organize around different functions or departments, and coordinate cross-cutting efforts.	Prioritize the needs and goals of individual functions or departments above all else.
Marketing	Create awareness of, and promote, the brand in order to generate demand.	Organize around generating visibility, demand and impact.	Prioritize activites and outcomes that increase demand for the brand.
People	Build a competent, motivated and engaged workforce that meets the needs of customers and stakeholders.	Organize around the needs and goals of employees, while maintaining a focus on meeting customer needs and other considerations.	Prioritize the needs and goals of employees above all else, recognizing that a healthy and engaged workforce is essential for the success of the organization.
Process	Deliver high-quality products and services through efficient and effective processes that meet the needs of customers and stakeholders.	Organize around executing efficient and effective processes, while paying attention to business objectives.	Follow established processes and procedures above all else, sacrificing other considerations in order to do so.
Product	Deliver high-quality products that fit to the company's market.	Organize around products or services, while maintaining a strong customer focus.	Prioritize product outcomes above all else, relying on the product's market impact to drive business.
Sales	Acquire leads, close deals and grow.	Organize around prospective deals and acquiring customers.	Highest priority is given to activites that generate growth.
Technology	Technological solutions and innovation keep the company ahead of the market.	Organize the business around technology capabilities. The development and maintenance of technology infrastructure are key drivers of business success.	Align technology solutions with business objectives and use technology to drive success.

Beyond the dichotomy

A "functional organization" will become highly ineffective when the internal communication and coordination gets in the way of employee and customer needs. Unfortunately, a similar thing might happen in a "product organization" when either-or situations between product progress and people's needs arise.
The table contains no single irrelevant item. In reality, no company is purely one archetype or the other. We thus can't even ask, "From which one archetype towards which other one should we transform?" We need to ask ourselves, "Which drawbacks do we see in our current archetype, and how could we integrate impulses from other archetypes in order to overcome these drawbacks and become more effective as an organization?"

Then, how should we organize?

Companies must strike a balance between the different archetypes, borrowing elements from each to optimize their performance. For example, a company may claim to be strongly customer-focused, but upon closer examination, may be product-focused, supported by data and people. To ensure success, companies should continually inspect and adapt their organizational mix to ensure it aligns with their goals. Leading questions might be, " Are we overemphasizing something that's not suitable for us? Are we underemphasizing something that we maybe should emphasize? If we continue our current approach, which challenges will we face? What do we expect to happen if we make a change?"

Author's note

I am not in a position to tell you how you should organize. My personal belief is that any single archetype, pursued exclusively, will end up being dysfunctional. I would expect most organizations to take impulses from product-focus, customer-lead and people-centricity, while paying due attention to technology and process, with specialized functional areas for cross-cutting platforms and capabilities. But most of all: they would adapt.

The best organizations wouldn't have to decide up front the lead, the center, and the focus - they are able to adapt both locally and globally without major shifts or changes.

Balancing interests at any time, every level of abstraction and in every area is important - because otherwise, people, teams and groups will prioritize their own needs, resulting in local optimization, cannibalization of efforts and unnecessary conflict.
Different people prioritize different things (e.g. time to market and revenue for product folks, quality and sustainability for technical folks, and growth and learning for organizational folks). A system of balance that makes conscious decisions from different perspectives is necessary. This balance of interest is necessary, and the critical question that many organizations stuggle with is determining whether something is going overboard. This won't be covered automatically when there's no transparency what the various perspectives are. Achieving balance is a difficult, ongoing process. Regardless of where we start to balance things out, at some point, we will discover that unless the company's Board of Management provides a balance, the imbalance will continue.

A possible solution

This post wouldn't be complete if I wouldn't be pointing you to a practical way to get this going:
The TOP Structure offers an approach that will help you make different goals visible and transparent, start discussions on whether you believe you're centered, focused and leading on the right things - and then get going to improve the situation.
You can use the TOP Structure as an individual, in your team, in your product group, in your department - or in your company, to balances the different perspectives and find the best thing that works for your context. Read the TOP Guide for practical guidance to get you started. And don't hesitate to contact me if you'd like to learn more.