STRATEGY

Build a Product-Driven Company

If you want to manage a hyper-growth company, start with a great product. Here's how.

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The best product wins.  Period.

With a great product comes great customers, and with customers comes revenue and profit, which in turn can be used to build more great products.  It's a continuous cycle.

That's why I believe so strongly in a product-driven organization.  That is, a company that focuses all functions on the product.  Sales and marketing become the channels to take that product to market and everything else in the organization-finance, human resources, IT-are there to support the product and those who work on it.

In a product-driven organization, management teams oversee products as if they are each independent businesses.  A product manager is like the CEO of the product, the engineering lead like the CTO, and the top marketer the CMO.  Each one needs dedicated resources for his respective functions and needs control over those resources to drive the plan.  Together, as a product leadership team, they live and breathe their product every day.  The product is their life, their passion.

This team measures its product just like a standalone business.  It strives to meet and balance short-term revenue and profit goals, as well as long-term strategic objectives.   Just like a healthy top-level management team, its members all need to be in constant communication, and always 100% in sync, driving to the same goals.  They may initially differ on direction, but always need to be committed to executing the same plan.  They need to work together as a tight unit-always committed to each other, always working together.  I would never walk into a board meeting out of sync with my management team and would never point a finger at a member of my team in a board meeting; a product leadership team needs to behave the same way.

Scaling and turning one product into multiple products sold in multiple regions is the challenge.  Great companies master this, average companies grow beyond one product, and those who lose sight of it fail.  If you try to manage multiple products with a horizontal company structure (sales, engineering, product management, and marketing are separate silos), you'll force decision-making in two directions: up to the top of those department and across to the product leads.  No one will have clear ownership, and autonomy becomes impossible.

It's also very difficult for a company to grow from a single product to multiple products if the company also has to shift from a horizontal organization to one that has multiple product leadership teams.  The challenge will always be decentralizing a common platform or code base, and assigning team members who wear multiple hats to one team.  If you wait for that all to untangle, you'll never get there.  Rip it apart, make the commitment to a product-by-product managed organization, and you will force untangling to happen.

Great companies like Amazon, Google, and Apple have adopted product-driven structures very successfully.  Jeff Bezos, Founder and CEO of Amazon, walked into the office one day and demanded that everything be separated and run as an independent service.

The team at Apple that built the iTouch is a separate team than the one that built the iPhone.  Though they appear to be similar products, the iTouch team woke up every day thinking about how it could get more people to buy and use the iTouch more often.  That team's members likely thought about video, music, entertainment, games, which resulted in the creation of the AppStore.  Meanwhile, the iPhone team likely thought about battery life, wireless network connectivity, and email and calendar integration.  If these were the same products, I doubt Apple would have built the iPhone as quickly as it did, and the iPhone probably wouldn't have been able to launch with the AppStore.  The two teams would have iterated on original products, and in the face of competitive pressure, would have been slower to take big leaps.  Instead, the two products helped each other.

Ironically, the iTouch and the iPhone are also competitors.  The iPhone's sales cannibalized the iTouch.  But all in all, Apple as a company won and is now the most valuable technology company in the world, known for building the greatest products.  The perfect example of a product-driven organization.

Last updated: Jun 13, 2012

FRANK ADDANTE | Founder and CEO, the Rubicon Project

Frank Addante is founder and CEO of the Rubicon Project, the world?s leading real-time trading platform for online ads. A five-time entrepreneur, he sold two companies and took a third public. He is author of FounderBlog.com.




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